ICRA sees FY2021 GDP at 2021
The Indian economy is likely to witness a sharp contraction of 4.5% (de-growth) during Q4FY2020 and a gradual recovery to just 2% GDP in FY2021,
post the Covid-19 outbreak and emanating concerns thereof, according to ICRA
ICRA expects the ripple effect of coronavirus to impact India Inc on five major counts:
a) Domestic demand slowdown due to regulatory restrictions, lockdown and fear of contagion will impact certain sectors over the near-term, while purchasing power erosion due to job losses or pay cuts and trickle-down effect of demand deferral will have a longer-lasting impact on some other sectors, especially where demand is discretionary in nature;
b) Global economic slowdown and lockouts is likely to impact sectors with high dependence on global demand, especially that of key impacted markets like Europe, North America and South-East Asia;
c) Impact on commodities like oil & gas, metals etc. will be due to lower global demand and price realisation;
d) Foreign exchange rate fluctuations will have bearing on import-heavy sectors with forex-denominated cost structure; and
e) Supply chain disruptions globally is expected to impact sectors where there is import dependence for raw materials.
The high impact sectors in terms of risks due to covid-19 are aviation, hotels, restaurants & tourism, auto dealerships, ceramic tiles, gems & jewellery, retail, shipping, ports & port services, seafood & poultry; and microfinance Institutions.
The medium impact sectors will be automobiles, auto-components, building materials, construction, chemicals, residential real estate, consumer goods, pharmaceuticals, logistics, banking, mining, paper, consulting, ferrous metals, footwear, glass, plastics, power; and trading.
The low impact sectors will be education, dairy products, fertilisers & seeds, FMCG, healthcare, food & food products, insurance, telecom, utilities, sugar, tea, coffee; and agricultural produce.
Notwithstanding RBI intervention and move by banks regarding treatment of moratorium period, ICRA expects entities with weak liquidity buffer (relative to its fixed overheads and non-deferrable debt service obligations) to report significant weakening of their credit profile over the next couple of quarters. fiinews.com
