COVID-19 pandemic may hit tourism, MSME, aviation sectors hard, says RBI survey

The aviation, automobiles, construction, MSME, and tourism & hospitality sectors are likely to be the hardest-hit ones by COVID-19 pandemic, according to an RBI survey.

The apex bank carried out a systemic risk survey "to capture the perceptions of experts, including market participants, on the major risks faced by the financial system". The survey was published in its financial stability report released recently.

The results (of the survey) pointed out the five sectors mentioned above that are adversely impacted by the coronavirus pandemic.

Also Read: Pray For India Inc: Coronavirus destructs India's aviation, tourism, auto sectors

Respondents opined that "while most sectors face sizeable and immediate revenue losses, the adverse impact is seen in sectors where consumption spending is discretionary in nature".

Within the tourism sector, around 90 per cent of the respondents stated that the "prospects of recovery within the sector in the next 6 months appear bleak". The aviation sector appears to be a close second, with nearly 85 per cent of the respondents categorising the future prospects as grim.

Several experts are of the view that the aviation sector need the government support as it has high fixed costs. The sector is highly leveraged and is among the worst-hit sectors, it added.

Also Read: India's economic recovery started in June, says SBI Chairman Rajnish Kumar

In the Micro, Small & Medium Enterprises (MSME) sector, 60 per cent of the respondents view a bleak recovery in the future, while 50 per cent of them in the automobile and construction and real estate sector feel the chances of revival appear gloomy in the future.

Incidentally, construction was already faring any better before the government announced the lockdown. Over 24 per cent of loans to this sector were categorised as non-performing as of March 2020, second only to gems and jewellery where around 25 per cent of the loans had already gone awry.

As per the survey, the impact of COVID-19 is likely to remain for 3-5 years and may affect the "quality of credit in the books of banks, the general risk-taking ability of entrepreneurs, investments in capital markets and real estate, and the saving pattern of households".

Also Read: Coronavirus impact: MSMEs demand loan moratorium till March 2021

Also Read: COVID-19 effect: Consumer confidence plunges in May; GDP likely to contract by 1.5% in FY21, says RBI survey