The exogenous supply and demand shock due to the COVID-19 pandemic is likely to cause a recession for the first time since 1979, PwC report said.
In a survey conducted by accountancy firm PwC India, 79 percent of respondents said that their income levels have been impacted due to COVID-19. Still, a majority of respondents (52 percent) are hopeful of economic recovery within the next 12 months.
Early discovery of COVID-19 vaccine will be a source of confidence but its delivery to over a billion people might take time, said the report titled 'Full Potential Revival & Growth - Charting India's medium-term journey'.
The PwC report also noted that the health situation continues to be dynamic with the continuing spread of the virus. "This has created a direct shock to the economy resulting in a recession," it said.
On the economic impact of COVID-19, it said the exogenous supply and demand shock due to the COVID-19 pandemic is likely to cause a recession for the first time since 1979.
It has affected the country's aggregate supply due to lockdown measures, worker migration and disrupted supply chains. It has also impacted aggregate demand due to loss in spending ability, the report said, which outlines key themes and an execution approach in nine key sectors that "can achieve significant economic uplift" over the next three years.
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Shyamal Mukherjee, Chairman, PwC India said, “This is a severe exogenous shock for the Indian economy, but it can also be a transformative moment for India. We have an opportunity to rethink our approach, reconfigure our business ecosystem, and restart our economy. Adopting a whole-of-society execution, bringing together the public and private sector along with citizens, would be key to spur faster revival and growth.”
PwC said the report is based on interviews with business, public sector and citizen leaders, sectoral analysis, and a countrywide survey.
The global accountancy firm said nine key sectors that make up 75 percent of pre-pandemic GDP (gross domestic product) and MSME segment were analysed in the report.
The report added that predicting a revival is difficult but it cites a recent PwC CXO Survey as well as a wider consumer survey done across 1,500 people from across the country, which indicates that the most likely horizon for the economic revival is the second quarter of 2021-22.
"This will depend on the control of the contagion and the discovery and administration of a vaccine," it said.
The report further stated that the government stimulus of Rs 20 lakh crore and reforms under the Aatmanirbhar Bharat targeted the lower and middle strata. The focus on MSMEs, food supply and the direct benefits transfer (DBT) is addressing the stress on employment, migration and creating a safety net for the vulnerable, with technology a key facilitator to target and transfer funds.
Government spending on infrastructure, including health, is expected to help pump-prime the economy beyond the stimulus.
"We estimate that government spending will rise from the current 11.8 per cent GDP to 5-7 percent extra, tapering back in FY23 and beyond," it pointed out.
According to the report, unemployment has recovered from a high of 24 percent but is still untenable at 11 percent. "Employment recovery will be a critical measure of success in the revival and growth phase," it said.
(With inputs from PTI)
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