Extended period of lockdown and increase in COVID-19 positive cases to have a strong impact on growth and level of disruption
Real Economy: May 2020 was the 2nd month of the lockdown and hence industrial production is expected to register decline in growth rates, similar to the levels witnessed during April 2020.While slowdown in demand continues, the migration of laborers has added to the challenges faced by companies, especially MSMEs (Micro, Small, and Medium Enterprises). Despite The Reserve Bank of India’s (RBI) continuous measures to inject liquidity in the system, a recent survey of CFO’s conducted by Dun & Bradstreet found businesses continue to face liquidity challenges. Dun & Bradstreet expects Index of Industrial Production (IIP) to have fallen by (-) 55% - (-) 50% during May 2020.
Price Scenario: Supply chain disruption is expected to keep food prices elevated. An increase in the COVID-19 positive cases is keeping 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% - (-) 3.1% during Jun 2020.
Money & Finance: Low transaction in the bond market, slowdown in bond purchases by the RBI, acceleration in the positive number of cases, along with Foreign Institutional Investment (FII) outflows in the debt market is expected to keep yields high during the current month. Dun & Bradstreet expects 15-91-day Treasury-Bill yield to average at around 3.2%-3.3% and 10-year Gr-sec yield at around 5.5%-5.6% during Jun 2020.
External Sector: The rupee is expected to remain weak over concerns regarding resumption in economic activity due to the increase in intensity of COVID-19 cases, weak global growth, strong dollar and continued FII outflows. Dun & Bradstreet expects the rupee to remain at around 75.8-76.0 per US$ during Jun-2020.