Economy vulnerable to coronavirus-led slowdown, says government

Our Bureau New Delhi | Updated on March 17, 2020 Published on March 17, 2020

MoS Finance Anurag Thakur   -  PTI

Disruption of trade with China, second-round effects from global slowdown may cause disruptions: Minister of State for Finance Anurag Singh Thakur

The government has acknowledged that the economy is vulnerable to a coronavirus-led global slowdown. However, it claimed, the latest data do not show any disruptions as of now.

Meanwhile, an SBI research report has estimated an impact of up to 90 basis points (100 basis points mean 1 percentage point) on the GDP due to disturbances in the trade, transport and tourism sectors.

In a written reply to a question in the Rajya Sabha on the impact of the coronavirus outbreak on the Indian economy, Minister of State for Finance Anurag Singh Thakur said: “As is true for the world at large, India’s near-term macroeconomic outlook is also vulnerable to disruption of trade with China and second-round effects arising from expected slowdown in global growth.”

However, the latest available data on trade and indicators of domestic output do not suggest any adverse impact on the economy, he said, adding: “Additionally, a positive impact on India’s economy may arise from a decline in global oil prices triggered by the outbreak of Covid-19.”

Earlier estimates

Prior to the outbreak, an official estimate by the Statistics Ministry projected GDP growth at 5 per cent for the current fiscal. The economy was expected to pick up next fiscal. The IMF projected a growth in India’s GDP to 5.8 per cent in 2020. Economic Survey 2019-20 projected a pick-up in growth in the range of 6.0 per cent to 6.5 per cent in FY21.

However, there is apprehension that with the virus outbreak, global growth will take a 40-150-basis-point hit, and India will be no exception.

Thakur said the outbreak of Covid-19 — first in China and now confirmed in more than 100 countries — has emerged as a key risk to human health as well as global growth. The latter is occurring through numerous channels like trade, production and supply chain disruptions; decline in demand; lower tourism and business travel; loss of investor confidence; and productivity losses from the health impact on morbidity and mortality of work force.

Reaching out

To address the possibility of a trade-induced adverse impact on the economy, the government is constantly engaging with export promotion councils and trade bodies, particularly in the pharmaceutical, electronics and automobile sectors, where the supply chains depend on imports from China, he said. These agencies have been asked to be in touch with Indian missions abroad to secure and transport inventories available with the existing suppliers, he added.

Indian missions abroad have also been asked to explore alternative sources of supply of raw materials in their respective countries to support production here.

The impact of Covid-19 on fertiliser availability seems negligible at this juncture, Thakur said, adding that the import situation at various ports is being closely monitored.

SBI report

Meanwhile, a research report by SBI said an inoperability analysis of three sectors — transport, tourism and hotels — showed significant impact on demand and hence output. On an aggregate basis, “we estimate that the impact of a 5 per cent inoperability shock could be 90 basis points on the GDP from the trade, hotel and transport and tourism, storage and communication segments, that could be spread over FY20 and FY21, with a larger impact in FY21,” it said.

Published on March 17, 2020
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.