The coronavirus epidemic can impact India's March quarter GDP growth by 0.20% as imports from China for crucial sectors have got affected, a foreign brokerage said on Monday.
The country's economic growth is already sagging and is set to slide to a decadal low of 5% in 2019-20 as per official estimates. Data for the December 2019 quarter released last week said growth had slid to a seven-year low of 4.7%.
Two cases tested positive for the coronavirus infection in India on Monday, after the initial set of three cases in Kerala were successfully treated.
In a report, UBS Securities said sectors such as electronics, pharmaceuticals and automobiles can see supply disruptions in value chain, which may lead to a derailment of the domestic economic growth.
"While the situation is still evolving and the scale of economic impact is highly uncertain at this point, we think an adverse impact of 0.20% could be felt in India's real GDP growth for the March 20 quarter," it said.
The brokerage also cut its fiscal 2020-21 real GDP growth estimate marginally to 5.6% as against the previous estimate of 5.7%, but added that there will be a recovery in the next financial year.
A favourable base effect due to FY20's low growth, improved monetary transmission and support from government spending will aid the growth momentum in the next fiscal, it said.
It warned that a delay in strengthening the balance sheet of the financial sector (banks and non-banking financial sectors) and weak credit impulse could continue to be a "drag" on the growth.
The Reserve Bank of India is expected to cut rates by 0.25 percentage points in the next fiscal and policymakers may continue to rely on "creative measures" like the liquidity moves in the last policy review to boost the growth, it said.
