Extended period of lockdown, increase in Covid-19 cases to have strong impact on growth: D&B

Extended period of the lockdown and increase in Covid-19 positive cases will have a strong impact on the economic growth, while supply chain disruption is expected to keep food prices at elevated levels, a Dun & Bradstreet report said on Friday.

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According to Dun & Bradstreet Economy Forecast, while the slowdown in demand will continue, the migration of labourers has added to the challenges faced by companies, especially MSMEs (micro, small, and medium enterprises).

"Dun & Bradstreet's analysis shows the extended period of lockdown, along with the increase in the number of infected cases, is restraining the return of supply side normalcy," said Arun Singh, Chief Economist, Dun & Bradstreet India.

A national lockdown began on March 25 and has continued in various phases into the month of June, albeit with significant easing of restrictions since early May.

Singh further noted that the increase in health expenditure will have a strong impact on "the depth and the length" of disruption in growth.

The report said that rising Covid-19 cases will keep the supply chain disordered, adding to the inflationary pressures on commodities that are more susceptible to disruption in the supply chain.

Besides, the hike in petrol and diesel prices by the government, along with the increase in global crude oil prices will be eroding the moderating impact of low fuel prices on the both the indices of inflation.

Dun & Bradstreet expects the wholesale price inflation (WPI) to be in the range of (-) 3.0 per cent to (-) 3.1 per cent during June 2020.

"Resumption in the supply chain and production activity will be highly staggered as states are opening their borders and economic activities in a non-uniform manner. Adding to the problem is the exodus of the migrant laborers, which will create a large demand and supply mismatch of labourers, at least in the near term," Singh said.

Singh further noted that the regional disparities in growth might fail to provide employment opportunities to labourers in some states/districts.

"At the same time, the lack of labour supply will impede production activity in others. In addition, the possibility of limited reverse migration would pose challenges to business activities," he said.

Meanwhile, in India, the death toll due to Covid-19 rose to 15,301 and the number of the number of infections climbed to 4,90,401, according to the health ministry.