As economies and several industries witness near standstill amid the coronavirus pandemic, a KPMG report says that the crisis may lead to greater protectionism globally.
It said that the supply chain disruption has brought to light the immediate and tangible impact of black swan events.
"That, along with the ongoing geopolitical environment and a globally recessionary climate is likely to lead to greater protectionism and risk aversion. This is expected to lead to greater localisation of supply chains, especially of essential commodities as well as for sectors that are perceived to be strategically important," said the report titled "Potential impact of COVID-19 on the Indian economy".
It also said that companies may turn more towards the digital mode. Most companies have opted to work remotely and their employees are now 'online' and working from home.
"While these trends were already 'in-motion', they have now hit the fast-forward button. Even the most traditional brick and mortar organisations have been forced to experiment with digital channels. This presents a real and immediate opportunity to drive efficiencies through digital media," said the report.
At the same time, it said that this crisis has highlighted the importance of investment in enabling technologies like cloud, data and cyber security. It will change the way we work with far reaching implications on business-to-business, business-to-consumer, business-to-government services, commercial real estate, e-commerce, e-governance, cyber security, process automation, data analytics, self-service capabilities and so on.
On the impact of the pandemic on the Indian economy, the report said that private consumption, investment and external trade will get affected.
India's real GDP growth decelerated to its lowest in over six years in Q3 2019-20, and the outbreak of the COVID-19 posed fresh challenges, the report said, adding that steps taken to contain its spread, such as the nationwide lockdown have brought economic activity to a near-standstill, with impacts on both consumption and investment.
"While Indian businesses, barring a few sectors, can possibly insulate themselves from the global supply chain disruptions caused by the outbreak due to relatively lower reliance on intermediate imports, their exports to COVID-19 infected nations could take a hit. In sum, the three major contributors to GDP -- private consumption, investment and external trade -- will all get affected."