In Chart: India’s GDP Growth Slump This Year Could Be Sharper Than Expected
Two out of every three companies expect their sales to contract in 2020-21 due to the slowdown triggered by the Covid-19 pandemic.
Two out of every three companies expect their sales to contract in 2020-21 due to the slowdown triggered by the Covid-19 pandemic, suggesting that economic growth in India could fall more than what was estimated earlier.
India’s real gross domestic product could contract 0.4 percent in FY21 versus a growth of 4.6 percent in FY20, Nomura said in a research note. Nominal GDP growth could slow down to 1.5 percent in the same period from 7.2 percent in the previous year, it said.
Nomura’s estimates were based on a survey done by FICCI and Dhruva Advisors of around 380 firms. The survey had found 70 percent of the firms expected sales to contract in FY21. About 41 percent of the firms expect sales to fall up to 20 percent. Twenty-nine percent expect a sales decline of over 20 percent, while 30 percent expect a positive outcome.
“Even though the corporate survey only has a small sample, its results suggest that the slump in GDP growth could be even sharper,” Nomura said. More than half of the respondents expect that it will take up to 9 months for normalcy in business to return.
“If this materialises, this will be the lowest sales growth in recent history,” Nomura said.
The expected fall in sales, coupled with liquidity concerns, will result in a “much bigger hit” to corporate profits, Nomura said. “In turn, this is likely to result in firms’ mulling job and salary cuts, delaying their capex plans and resulting in a longer path back to normal.”