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  3. Corporate India expecting 0.5% hit on economic growth in FY21: Care Ratings

Corporate India expecting 0.5% hit on economic growth in FY21: Care Ratings

17 Mar 2020 Evaluate

Amid coronavirus outbreak across the country, Care Ratings in its latest survey report has said that corporate India is expecting a 0.5% 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. The rating agency has 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.

As per the survey, the economic impact will be significant and long term if the virus continues for longer. A vast majority (52%) of those polled say the Gross Domestic Product (GDP) will come down by around 50 bps, while 22% expected the hit to over 1% in FY21, forcing the Reserve Bank of India (RBI) to respond by reducing the repo rate by 25-50 bps sooner than later. Survey respondents also fear a widening of the fiscal deficit if the government announces fiscal measures to support the economy with 70% expecting widening of the fiscal deficit to the tune of 0.25% in FY21.

Significantly, as much as 80% 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 much as 23% of the respondents see hospitality and tourism getting hit badly due to the adverse impact of the outbreak of coronavirus followed by airlines (11%) and auto and auto ancillary (9%). Some of the other industries which are expected to benefit apart are retail and e-commerce (4%), BFSI (3%), infrastructure (3%), capital goods (3%) and auto and auto ancillary (3%) among others. Impact on exports, 58% opine that the pandemic will hit exports 42% believe it will lead to a contraction in FY21 and 78% respondents also expect imports also to contract further.

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