Coronavirus Outbreak in India: The service
sector will be most impacted due to lockdown as consumption of non-essentials
takes a hit but lockdown's initial impact on manufacturing activity is expected
to be somewhat lower.

The nationwide lockdown has caused severe
crunch in labour, causing supply-chain disruptions
HDBC Bank, in its latest treasury report, has said the
21-day country-wide lockdown will shave off 74 per cent of the real GDP (Goods
and Domestic product) or Rs 10 lakh crore, and that the April-June growth will
contract 3 per cent. The contraction in economic growth will also spill over to
the next quarter, thus keeping the growth weak but in positive quadrant, it
said.
The report said the service
sector would be the most impacted due to the lockdown as consumption of
non-essentials takes a hit. However, once the lockdown is lifted, the service
sector activity may bounce back rather quickly. The nationwide lockdown has
caused severe crunch in labour, causing supply-chain disruptions.
The HDFC Bank report claims
the lockdown's initial impact on manufacturing activity is expected to be
somewhat lower as 1/3 of net value added in manufacturing comes from the
production of essential items such as food, beverages, petroleum and coke,
pharma and medicinal products. It added the drag on manufacturing growth may
linger on beyond the first half of the next fiscal year.
Overall, HDFC expects growth
to rebound fairly "strongly" in the second half supported by fiscal
and monetary stimulus. "Cumulatively, we expect the centre and state
governments to announce a fiscal stimulus package of 2 per cent of GDP,"
the report said.
The Modi government -- as
part of its initial package for poor people, women, and employees -- has
announced a stimulus of Rs 1.7 lakh crore or 0.8 per cent of the GDP. This
package includes health insurance for health workers, food for the poor and
direct benefit transfers.
Meanwhile, the bank expects the Centre and the state governments to announce
additional measures, including direct cash outs where bank transfers are
inadequate, support for sectors affected by weak demand or supply disruptions
post the lockdown and government guarantees for borrowing by NBFCs (non-banking
financial companies) and the MSME (Ministry of Micro, Small and Medium
Enterprises) sector. The bank also expects the Reserve Bank of India to support
businesses hit by COVID-19 by further cutting the repo rate up to 100bps.
The RBI, in its 7th
bi-monthly monetary policy announcement, cut repo rate by 75 basis points (bps)
along with 90 bps reduction in the reverse repo rate to offset the impact of
coronavirus pandemic on the economy. With this, several banks, led by the State
Bank of India, are now passing the rate cut benefit on to customers to offset
the impact on the economy.
India on Monday reported the
biggest single-day spike in new COVID-19 cases. It reported 227 new cases
taking the total tally to 1,385. Out of this, 101 have been cured and
discharged from hospitals. The death tally stood at 32 till March 30
morning, according to Health Ministry data.
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