KPMG Report on Potential Impact of COVID-19 on the Indian Economy
Published on : Monday 04-05-2020
The KPMG Thought Leadership report reveals key sectoral impacts of Novel Coronavirus (COVID-19) on the Indian Economy.
May 2020 – The recently released KPMG Thought Leadership report foresees how the Indian economy and businesses are likely to evolve in several industries including – Financial Services, Healthcare, Auto, Consumer, retail and internet business, among others. COVID-19 will lead to a significant change not only in the immediate term but also in strategies, ways of working and mind-sets of decisions makers and customers. KPMG believe that the Government should immediately focus on three areas: (1) job maintenance and creation, (2) provision of a safety net for all Indians and (3) resource mobilisation to support these goals. In sum, the three major contributors to GDP – private consumption, investment and external trade – will get affected.
Three scenarios can be used to explain the economic effects of COVID-19:
Scenario 1: Quick retraction across the globe including India; by end April to mid-May
China has significantly brought down the number of new cases and its manufacturing sector is all set to resume normalcy. Other nations also largely contain the spread of the COVID-19 pandemic and large fiscal and monetary stimulus unveiled will start to work sooner than expected, which will raise hopes of a solid recovery in the second half of 2020. In this case, India’s growth for 2020-21 may be in the range of 5.3 to 5.7 per cent.
Scenario 2: While India is able to control COVID-19 spread, there is a significant global recession
Even under this scenario, the impact on India's growth in terms of global spillovers will be meaningful, owing to India’s integration with the global economy. So India’s growth will be lower than scenario 1: the expected range is 4-4.5 per cent.
Scenario 3: COVID-19 proliferates within India and lockdowns get extended; global recession
This would be double whammy for the economy, as it will have to bear the brunt of both domestic and global demand destruction. Prolonged lockdowns would exacerbate economic troubles. India’s growth may fall below 3 per cent under this scenario.
KPMG conclude this paper with seven ways in which we think business landscape is likely to shift, not only in India, but also all over the world. Responding to these will certainly help countries and companies navigate the path to the ‘Next Normal’:
- The shift towards localisation
- Digital gets a real push
- Cash is king for businesses
- Move towards variable cost models
- Building sensing and control tower capabilities
- Supply chain resilience is key, and
- Building agility.
Additionally, the report covers 17 sectors with the potential impact and key policy recommendations.