India's Growth May Slip Below 3% In FY’21, If COVID-19 Proliferates: KPMG

Mumbai, April 9: India's growth could slip below 3 per cent in the current fiscal if COVID-19 proliferates within India, lockdown extended and global economy slips into recession, a KPMG report titled ‘Potential Impact of COVID-19 on the Indian Economy’, said.

It said the three major contributors to GDP -- private consumption, investment and external trade -- will all get affected due to the spread of the pandemic. The report presented three scenarios to explain the economic effects of COVID-19. 

In the scenario of quick retraction across globe by April-end to mid-May, the report said "India's growth for 2020-21 may be in the range of 5.3 to 5.7 per cent, though this scenario looks distant at this moment".

In the second scenario where India is able to control COVID-19 spread, but there is a significant global recession, the report said India's growth is expected to be in the range of 4-4.5 per cent.

However if the pandemic proliferates and there is global recession then it would be a double whammy for the Indian economy as it will have to bear the brunt of both domestic and global demand destruction, the report said.

"Prolonged lockdowns would exacerbate economic troubles. India's growth may fall below 3 per cent under this scenario," it added.

These growth projections compare to an estimated 5 per cent growth rate in 2019-20.

The report said steps taken to contain the virus spread such as the nationwide lockdown have brought economic activity to a near-standstill, with impacts on both consumption and investment.

"While Indian businesses, barring a few sectors, can possibly insulate themselves from the global supply chain disruptions caused by the outbreak due to relatively lower reliance on intermediate imports, their exports to COVID-19 infected nations could take a hit," it said.