NEW DELHI: The countrywide lockdown is likely to have a sizeable impact on the economy, most significantly on consumption which is the biggest component of GDP, KPMG India said on Monday. A significant reduction in urban transactions can lead to a steep fall in the consumption of non-essential goods. The impact will be even more severe if domestic supply chain disruption caused by the 21-day lockdown were to affect the availability of essential commodities.
Weak domestic consumption and consumer sentiment will have firms delay their investment, which will, in turn, put additional pressure on growth. Post COVID-19, some economies are expected to adopt derisking strategy and shift their manufacturing bases from China which can create opportunities for India.
KPMG India said the extent to which this opportunity can be leveraged is largely dependent on how quickly the economy recovers and the pace at which supply chain issues are addressed. "Apart from providing robust safety nets for the vulnerable, a focus on ensuring job continuity and job creation will be imperative," said KPMG India Chairman and CEO Arun M Kumar.
"And there is an urgent need to mobilise resources to stimulate the economy for increased demand and employment." Kumar said there are seven ways in which the business landscape is likely to evolve in the days to come: there will be a shift towards localisation, digital will get a real push, cash is king for businesses, businesses will move towards variable cost models, sensing and control capabilities will receive attention, supply chain resilience will become a central consideration, and businesses will look to become more agile.