India Inc fears coronavirus will pull down GDP by at least 50 bps

Corporate India is expecting a 0.5 percent hit on economic growth in FY2020-21 if the coronavirus pandemic lasts longer, pushing up fiscal deficit and creating more bad loans for the bank, says an industry survey.

Care Ratings conducted a survey on the impact of the coronavirus pandemic on the economy among over 150 CEOs, CFOs, investors, analysts, and other stakeholders from manufacturing, financial services, infra, realty and services between March 5 and 12.

According to the survey, the economic impact will be significant and long term if the virus continues for longer.

A vast majority (52 percent) of those polled say the GDP will come down by around 50 bps, while 22 percent expected the hit to over 1 percent in FY21, forcing the RBI to respond by reducing the repo rate by 25-50 bps sooner than later, according to 57 percent of the respondents.

They also fear a widening of the fiscal deficit if the government announces fiscal measures to support the economy, with 70 percent expecting widening of the fiscal deficit to the tune of 0.25 percent in FY21.

Significantly, as much as 80 percent opine that the NPA levels in the banking sector are going to increase owing to the outbreak across.

While the hospitality, tourism and aviation will be hit hard, pharma and healthcare will benefit from pandemic.

As many as 23 percent of the respondents see hospitality and tourism getting hit badly due to the adverse impact of the outbreak of coronavirus followed by airlines (11 percent) and auto and auto ancillary (9 per cent).

Some of the other industries expected to benefit are retail and e-commerce (4 percent), BFSI (3 percent), infrastructure (3 percent), capital goods (3 percent), and auto and auto ancillary (3 percent) among others.

On the impact on exports, 58 percent opine that the pandemic will hit exports, 42 percent believe it will lead to a contraction in FY21, and 78 percent expect imports also to contract further.

(Edited by Teja Lele Desai)