THE ECONOMIC IMPACT

THE LATEST DATA on most economic indicators is available till February, while the real economic impact of Covid-19 came in March. In fact, some of the indicators peaked for the fiscal year 2019-20 in February.

For instance, the core sector growth has done so (chart 1), and is likely to witness a major dampening impact in March. The sector comprises crucial industries such as coal, refinery, crude oil, cement, finished steel, fertiliser, and electricity generation. The only number available for March in real sense is PMI for manufacturing, which stood at 51.8 — the same as in the beginning of FY20 (chart 2).

Chart 3 again tells a story till February and shows the highest growth rate in services in any month during FY20. Given the fact that Covid-19 is affecting the services sector such as tourism and hospitality the most, the number is likely to see a major reversal in March. The auto sector was struggling before the Covid-19 outbreak as well, ranging from issues such as BS-VI to electric vehicles (chart 4). Chart 5 shows that the goods and services tax collection fell below the ~1-trillion mark in March for the first time after four months. Though these are for activities in February, companies may have witnessed difficulty in paying taxes in March. April may see a major correction if arrears are excluded.

Given the state of the economy, none believes that 4.7 per cent gross domestic product growth rate, pegged by the official advance estimates (chart 6), would come true. Therefore, FY20 would see less than 5 per cent economic expansion. The outlook for FY21 is more pessimistic (chart 7).