KPMG believes that the course of economic recovery in India will be smoother and faster than that of many other advanced countries and even UNCTAD in its latest report 'The COVID-19 shock to Developing Countries' has predicted that the major economies least exposed to recession would be China and India. 

 

The consultancy firm expects that Fed's stimulus package, at the best case, is likely to result in a U shaped recession. A hopeful V or U shaped recovery depends on the timing and magnitude of government assistance as well as the level of corporate debt and how companies and markets cope with lower demand. 

 

On the petrochemical front: Prices are likely to remain low due to uncertain domestic and global demand; China accounts for a third of the global petrochemicals capacity with large accumulated inventories leading to adoption of aggressive pricing to liquidate inventory and  restriction at important ports across globe is bound to disrupt the global supply chain can further aggravate inventory accumulation and drive prices down. 

 

In the medium-long term however, most of the fundamentals factors for growth and investments still hold in India - high population with increasing per capita chemicals demand, shift to Asia as a manufacturing hub, increasing purchasing power and availability of labour; the question remains on the timing of the recovery in economic activity. 

 

Supply chain restrictions and expected labour migration would be major impediments to pace and timelines of recovery. KPMG expects lockdowns to be lifted in late Q2 2020 paving the way for the market to start recovering in H2 2020.                    

 

The consultancy foresees seven ways in which the business landscape is likely to evolve in the days to come. These are: Shift towards localisation, digital gets a real push, cash is king for businesses, move towards various cost models, building sensing and control tower capabilities, supply chain resilience and building agility. 

 

Globally due to the COVID-19 pandemic, it is not only a manufacturing-only recession but has also spread to the services sector. Q1 GDP growth could show a significant impact from COVID-19 due to complete shutdown of economic activity in March. Q2 and Q3 will reveal a large adverse impact from falling consumption, business investment and exports. 

 

According to KPMG, India's growth for 2020-21 may be in the range of below 3 percent to 5.7 percent. First, growth will be 5.3-5.7%, if there is a quick retraction across the globe including India by end-April to mid-May. Second, growth will be 4-4.5 percent if India is able to control COVID-19 spread and there is a significant global recession. Third, growth may fall below 3 percent if COVID-19 proliferates within India and lockdowns get extended leading to global recession.