Though the initial three quarters of 2019 were marked by a number of negative factors including rising infl ation, a contraction in industrial output and a falling GDP growth rate; the economy towards the end of 2019 had started showing signs of a turnaround. Infl ation appeared to be easing, as industrial activity and the GDP growth rate began to show an uptick. 2020 opened on this positive note, with January and February indicating a revival in domestic consumption as well. Retail inflation stood at 5.8% in March 2020. The shift in gears in the domestic economy could be attributed to a slew of sector specific reforms initiated by the government throughout 2019. Probably the biggest of them was the scaling down of corporate tax rates in September 2019 – a commendable eff ort to spur investment and boost economic growth.

However, the world economy was engulfed by the COVID-19 pandemic in a less than a quarter. When comparing India’s relative positions in 2020 and 2008 (during the Global Financial Crisis), it is evident that the country has been aff ected far more deeply this time. One reason for this is that the local economy is more closely tied to the global economy in 2020 than it was in 2008.

Domestically, as COVID-19 cases grew, the government declared a nation-wide lockdown on 22nd March 2020 and this has already been extended three times. Curbs on movement, supply chain disruption, the stoppage of construction activity and labour shortages in April and May, have caused a decline in most sectors of the economy including commercial real estate. Retail infl ation, including food infl ation, spiked in April 2020 owing to the disruption of transportation and supply chains.

As the country gears-up for a phased easing of lockdown, the economy, including real estate, is expected to begin a gradual recovery process. A host of liquidity-enhancing, consumption-boosting, and financial relief packages have been announced by the government. The central bank has stepped in frequently, easing key interest rates. The Reserve Bank of India has also allowed deferment of commitments to financial institutions by six months. On the ground transmission of policy rate cuts by nationalised lenders has improved significantly and is expected to contribute to economic activity and overall consumption, when the revival process starts in 2H/2020.