Why in news?
- Sales of sensitive petroleum products such as petrol and diesel have dropped in March compared with February as more people stay back at home to prevent COVID-19 from spreading.
- Crisil has cut India’s GDP growth rate forecast for FY21 citing financial sector stress and COVID-19 impact.
- Organised retailers, dealing with non-essential daily use items, are struggling to keep their business operations on, even as State governments are coming out with new regulations to curb the spread of COVID-19 in the country.
- The spread of COVID-19 in India and the resultant restrictions imposed by government authorities to contain it is expected to impact the real estate sector significantly, say developers and analysts.
Drop in Fuel Sales
- The fall in the sales of sensitive petroleum products was sharper in the second week of March and is likely to fall at a faster rate in the weeks coming ahead as more and more people are staying back at home to avoid getting affected by the virus.
- The decline in sales comes even as prices of petrol had fallen by over Rs. 6 a litre and diesel by about Rs. 7 a litre since January 2020 on the back of plummeting global crude oil prices.
- Aviation business has been more impacted on falling Aviation turbine fuel (ATF) sales as it services more international flights, which witnessed higher cancellations in March.
India’s GDP Growth Rate Forecast
- Crisil has cut its base-case GDP growth forecast for fiscal 2021 to 5.2%, from 5.7% announced recently.
- Reasons: Domestic consumption demand may take some hit and the other downside to growth is also due to the financial sector stress now percolating to private sector banks.
- A serious downside to the base case can emerge from two developments.
- One: the pandemic is not contained by April-June 2020 globally, and makes the global slowdown more severe.
- Two: it spreads rapidly in India, affecting domestic consumption, investment, and production. These would further hurt confidence and the financial markets
Retailers facing large-scale closures
- All business establishments inside shopping malls, other than those dealing with essential items such as grocery and vegetables, have been closed.
- Several standalone stores of organised retail chains have been closed to comply with the regulations.
- According to retailers, authorities are not allowing stores located in densely populated areas to remain open.
Real Estate sector likely to Suffer
- In the mid-term, it is expected that new sales will be badly impacted and there will be a surge in default by customers. This will certainly have a cascading effect on the repayment of loans availed by customers and developers.
- People are avoiding stepping out of homes and hence there is a dip in walk-ins across all residential projects too. Investors, as well as end-users, are opting for a ‘wait and watch’ policy amid the pandemic.
- When it comes to commercial real estate, the impact of COVID-19 in form of shutdown of retail outlets and malls as also entertainment and fitness centers has put commercial real estate deals on ‘wait and watch mode’.