India’s GDP Could Contract For First Time In Four Decades: Covid Impact Index

Given the global scope of the current pandemic, there has been massive disruption not only to individual businesses but also to their overall relationships (business' customers as well as their supply chains). To study its effect, Dun & Bradstreet (D&B) rolled out this week’s Covid Impact Index, giving us a robust view of the important factors impacting businesses during the coronavirus outbreak. Data elements such as Covid-19 cases in a district, lockdown measures, corporate family members in affected districts, and industry classification have been considered in this weekly update. 

This weekly snapshot helps paint an accurate picture of the impact of the Corona virus on businesses. We spoke to Julian Prower, Chairman – India Board and Chief Operations Officer – International, Dun & Bradstreet on how this index is unique compared to all other risk analysis D&B has done in the past. “The Dun & Bradstreet Covid-19 Impact Index helps to identify businesses, suppliers and/or prospects in a company's portfolio that are more exposed to the impact of the coronavirus outbreak in comparison to others. It helps to understand if a business is more likely to survive this disruption or rapidly declining or even growing due to the pandemic. We have assessed the business impact of past natural disasters to develop this Index and have extended those learnings based on the unique characteristics of the Covid-19 pandemic," he comments.

This brought us to asking his if the business environment is much grimmer in India compared to their foreign counterparts, to which he explains, “The Covid-19 pandemic has caused a dent in both supply and demand, which is clearly seen by the slowdown in production, trade and consumer spending. It has impacted almost every country – albeit depth and width of shock varies from country to country. Complexities and the degree of impact varies due to the nature of the industry, linkages both internal and external, domestic or overseas location, flexibility in the business and operating model that in turn is a function of the degree of automation, current imposed restrictions and current demand. 

Given this unprecedented shock, most of the economies around the world are expected to contract this fiscal year. And India is no exception - India’s GDP could contract this year for the 1st time in four decades. This implies a slowdown in demand for most of the sectors. The recovery will depend on the extent of impact, government support and intervention and overall business thrust. However, India has an edge as compared to many economies in the world. A sharp recovery can be expected in the next year.”

From an India-specific perspective, we asked his to apprise us with the sectors/ businesses that were particularly benefitted and the ones that faced the brunt of it. He explains, “There are sectors that have had a relatively lower impact. But the framework, with its current focus, cannot determine the sectors that may have been positively impacted. The Index has highlighted a relatively lower impact on sectors such as Agriculture and Public Administration. Construction and Transportation, on the other hand, have the higher percentages of impacted companies with 94% and 66% respectively.”

Companies that score high on this Index are those who have been least impacted during these times. We asked Prower on the number of businesses that benefited or created opportunities in these times. He states, “Of the top 2 percentile least impacted, we see the majority are drug stores, hospitals and general medical, grocery stores & pharmaceutical preparations companies (Basically, essential products and services).

Even though the index does not corroborate or provide insight on the business that would have benefited, from an economic and business environment perspective the current pandemic has seen the fortune turn for many digital native companies focused on essential services, education and automation. These along with the traditional IT product companies have seen a short-term resurgence in the demand for digital products along with the companies focused on connectivity solutions at home.”

Last but not the least, Prower throws light on how businesses were able to make key decisions based on this data. He comments, “We have engaged with our clients across the world to help them analyse the potential impact Covid-19 on their businesses and those they do business with. The Covid-19 impact index has supported key business decisions from selecting the ideal prospects to target, to mitigating the supply chain risk and selecting suppliers. It has also helped businesses to prioritise collections.”