Covid-19 impact: Worst over, but auto, retail, real estate still ailing

The pandemic and the lockdown have shattered and left three key sectors of the economy — real estate, automobile and retail — facing challenges of a kind not seen in decades. These sectors account for nearly a fourth of India’s GDP. Retail trade, second only to agriculture in terms of contribution to GDP (about 10 per cent), saw business shrink to less than 25 per cent of normal levels.

While business in the otherwise fast-growing modern trade remains below 20 per cent, standalone outlets continue to suffer a 61 per cent loss, according to a report by the Retailers Association of India and Anarock.

As localised lockdowns haunt retailers, segments such as apparel, restaurants and personal care are the worst hit, with sales plummeting to over 65 per cent. In local groceries, mostly kirana shops, the impact has been less severe. They are witnessing only a 25 per cent drop in business.

Even before the pandemic, one of India’s largest manufacturing sectors, the automobile industry (7.5 per cent of GDP), was witnessing double-digit decline in sales year-on-year (YoY) almost every month since-mid 2019.

Then, in April, sales came down to zero. Passenger vehicles’ offtake halved and two-wheeler sales dropped 49 per cent YoY between April and August to 552,429 and 4134,132 units respectively. While the numbers for August were encouraging, industry veterans such as Shashank Srivastava, executive director, sales and marketing, Maruti Suzuki India, say they may not herald an overall recovery.

Maruti Suzuki, which has over 50 per cent of the passenger vehicles market, recorded a 20 per cent growth in August. “But it came on a very low base,” Srivastava says.

Analysts at Macquarie Research have noted that the ongoing crisis has been the most severe ever across auto segments. Returning to pre-Covid levels is likely to take a long time.

The long-distressed real estate sector (6 per cent of GDP) also suffered a body blow. Sale of residential units plunged by 49 per cent to below 58,000 units till June. This was not only 37 per cent lower than the second half of 2016, which saw demonetisation, but the lowest in the decade.

“The worst is now over. With people stuck indoors, the need for a secure home is now driving the sale of affordable units, capped below Rs 4 million,” says Pradeep Aggarwal, chairman, Signature Global Group.