India’s economy, already in the grip of a slowdown, is in for more pain after PM Narendra Modi appealed to citizens to stay at and work from home to curb the coronavirus outbreak
Indian services sector, which accounts for about 55% of India’s gross domestic production, is poised to be the worst hit after Modi, in a late evening address on Thursday, urged citizens to go on a self-imposed curfew for a day and private companies to allow employees to work from home for longer. In a country like India has a vast informal sector, social-distancing measures could mean a great dent to productivity and consumption because of job or pay losses.
“The impact of 21 days lock-down or social distance . will be significant, said by Rahul Bajoria, a senior economist at Barclays Plc in Mumbai. , GDP could fall as low as to 3.5% in the financialyear starting April 1
The shrinking output may limit the growth in an economy that’s already set to expand at an 11-year low of 5% in the current year to March 31. Before the Corona virus outbreak, India had forecasted the growth to recover to 6%-6.5% in the next fiscal year. S&P Global Ratings and the Fitch Ratings have already slashed their growth rate forecast by 50 basis points.
“The current social distancing measures will also have great impact on airlines, hotels, malls, multiplexes, restaurants and retailers,” according to analysts at Crisil Ltd., the local unit of S&P Global. “Lower footfalls and occupancies, decline in business volume and sub-optimal operating efficiencies will impact cash flows of companies in these sectors,” wrote the analysts led by Chief Economist Dharmakirti Joshi.
The government will try to announce a relief package for virus-affected sectors as early as possible, Finance Minister Nirmala Sitharaman said Friday