SME Futures Explains the sectoral impact of Coronavirus on the Indian Economy

The Novel Coronavirus, COVID-19 has infected the world, impacting lifestyles, businesses, economies. However, even before the onset of this pandemic, the global economy was confronting turbulence on account of disruptions in trade flows and attenuated growth. This world crisis has now been aggravated by the demand, supply and liquidity shocks that COVID-19 has inflicted.

India’s real GDP decelerated to its lowest in over six years in 3Q 2019-201, and the outbreak of the COVID-19 has posed fresh challenges. In sum, the three major contributors to GDP — private consumption, investment and external trade — will take a hit, lowering the GDP.

Amid this, elevated debt levels in the market have made social distancing more costly. To top it the Foreign value-added component in India’s gross manufacturing exports is much lower than that of its Asian peers like Thailand and Vietnam. In fact, Purchasing Managers’ Index indicates some economic crisis.

Steps taken to contain its spread, such as nationwide 21-day complete lockdown, have brought economic activity to a standstill. The lock-down is likely to have a sizeable impact on the economy, most significantly on consumption, which is the biggest component.

On this Nirmala Sitharaman announced a relief package of 1.7 lakh crore and the RBI—cut the repo rate by 75bps and has given 3 months pause on the EMIs.

Coronavirus has impacted the entire economy, but the most affected sectors are retail, manufacturing, MSMEs, education, automobile, tourism, aviation, hospitality, textile, real estate, pharmaceuticals, e-commerce and agriculture.