NEW DELHI: Partial or full lockdowns have begun blooming all across India as states scramble to contain the second wave of the Covid-19 pandemic, but India Ratings and Research said in a note on Monday that this is likely to only have a muted impact on the overall business environment—the past six months have seen export demand and improved balance sheets.
The severity of the impact will not be uniform however. The agency says that though supply chain disruptions could play out, the overall impact on corporates is expected to be moderate to minimal. But small businesses and retail borrowers are likely to see increased stress. The latter could lead to a build-up of potential asset quality issues in the unsecured lending books of lenders and an increase in softer delinquencies in the MFI segment, it noted.
According to the agency, this assessment will change for the worse if there was to be a stringent national lockdown or a protracted normalisation of activities due to the pandemic. The economy in general, it noted, will have a bumpy road to recovery.
India Ratings observed that the second wave is expected to be less disruptive than the first wave for overall businesses, despite the daily caseload reaching more than four times of the peak level seen during the first wave, because the administrative response is likely to be confined to regions. The agency believes companies are also better prepared to operate under localised lockdown conditions while adhering to various guidelines.