NEW DELHI: The countrywide lockdown to arrest the spread of the COVID-19 pandemic may well see India’s GDP growth slipping below 3 per cent if it continues beyond the 21-day mark, KPMG India said on Monday.
The agency’s report predicts that the trajectory of the Indian economy could see three possible scenarios. One, where the lockdown is lifted as scheduled in India and the globe. Two, where India recovers but there is a recession globally.
And, finally, where the lockdown is extended both in India and the world. “This would be a double whammy... 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 said. However, if India recovers earlier than it’s global peers, it’s GDP growth for the year 2020-21 will stand at 4-4.5 per cent, it added.
But, irrespective of which of these three scenarios is realised, KPMG predicts a “steep fall in the consumption” of non-essential goods. “Weak domestic consumption and consumer sentiment will have firms delay their investment, which will, in turn, put additional pressure on growth,” the authors warned. The agency has also suggested three measures to contain the economic woes.
“Apart from providing robust safety nets for the vulnerable, a focus on ensuring job continuity and job creation will be imperative,” added KPMG India Chairman and CEO Arun M Kumar, adding that resource mobilisation for this will be a key requirement. On a positive note, KPMG observed that post COVID-19, some economies are expected to adopt a de-risking strategy which could see them shift their manufacturing bases from China creating opportunities for India.
Fleeting opportunity
The extent to which India may leverage the flight of companies from China will depend largely on how quickly the economy recovers, says KPMG