Adding the impact from the outbreak, Moody’s now expects India’s real GDP to contract in the fiscal year ending March 2021 (fiscal 2020-21) compared with an earlier projection of zero growth. The Reserve Bank of India (RBI) Governor Shaktikanta Das in his monetary policy review statement projected that the economy will contract in FY21. Moody’s estimates that economy is also expected to recover somewhat more strongly in fiscal 2021-22 relative to an earlier forecast of 6.6% growth.

Among corporates, the auto, oil & gas and mining sectors will bear the brunt of the downturn, given their sensitivity to consumer demand, sentiment and supply chain disruptions. The economic slowdown will also hit the performance of commercial vehicle and MSME loans, with the effects more significant if the outbreak spreads and suspension of business activity is prolonged. “Moreover, we expect the economic shock from the coronavirus to result in significant slippage from the central government’s budgeted deficit target for fiscal 2020-21,” added Tan.