The coronavirus outbreak and subsequent lockdowns across the world have taken a toll on business and economic activities across sectors. India’s GDP growth for FY21 is expected to sharply decline than what was estimated earlier by various ratings agencies.

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According to Dun & Bradstreet, besides the impact on human lives and the global supply chain, the pandemic is a severe demand shock that has offset green shoots of recovery of the Indian economy that were visible towards the end of 2019 and early 2020.

In its latest report, D&B expects India’s Micro, Small, and Medium Enterprises (MSME), electronics, gems and jewellery, and tourism and hospitality sectors to be severely impacted and could take over 12 months to recover due the disruptions caused by the pandemic.

The 12-month period was reached, assuming that the COVID-19 pandemic subsides in India and all businesses resume operations from June 2020 -- in a staggered manner. Here are the worst impacted sectors according to the report.

Micro, Small, and Medium Enterprises (MSMEs)

Recessionary pressures across the globe are expected to have a direct impact on the level of global exports. Given that MSMEs contribute to over 40 percent of India's exports, the impact will be severe and linger for a longer time.

MSMEs are expected to experience severe liquidity problems due to delayed payments from their customers. The strain in the banking system is expected to increase the credit gap for MSMEs, the report added.

Electronics

The demand for white goods and other high-end consumer durables will remain impaired as consumers are expected to postpone their purchases because of lower disposable income, and uncertainty over growth prospects. About 50-60 percent of the products and 70-80 percent of the components are imported, and a shortage of components of electronic goods from China is likely to keep prices higher and hence will impact demand.

Tourism

Dun & Bradstreet assumes both foreign tourist arrivals and domestic tourist movements to remain very low even after the travel bans are lifted because of heightened risk aversion, measures related to social distancing and lower disposable incomes.

Hospitality

D&B assumes that the slowdown in the tourism sector to have knock-on effects on hospitality. It expects occupancy rates to remain very low until Q1FY21. In an effort to increase and improve the bottom lines, many businesses are expected to cut down travel and accommodation costs for their employees, it said.

Gems and Jewellery

With recessionary pressures across the globe, demand for gems and jewellery is expected to be severely impacted over the next couple of quarters. Domestic companies will be severely impacted and may take more than 12 months to recover as exports constitute a major portion of their net sales, according to the report.

Banking

The report points out the Reserve Bank of India’s (RBI) estimation that Non-Performing Assets (NPAs) may increase to 10.2-10.5 percent by September 2020. With the outbreak of COVID-19, this figure is expected to increase. The phase to recovery will depend on the outcome of the measures that the RBI has initiated and is likely to take place in the following weeks, it said.

Automotive

The report assumes that the demand for cars is likely to be deferred or dropped given low consumer confidence, subdued economic activity, lower disposable income and higher prices. Further demand for commercial vehicles will be dependent on growth in Gross Material Products (GMP), which is expected to be slower and component dependency to create supply side disruption.

Entertainment

D&B assumes the biggest concern for the sector is the likely continuation of social distancing measures to avoid the risk of any relapses. Revenues from advertisements will be dependent on revival of the aggregate demand in the economy.

First Published:Apr 28, 2020 7:26 PM IST