Corporate Sector Resilience in India in the Wake of the COVID-19 Shock

By Lucyna Gornicka, Sumiko Ogawa, TengTeng Xu

November 19, 2021

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Lucyna Gornicka, Sumiko Ogawa, and TengTeng Xu. Corporate Sector Resilience in India in the Wake of the COVID-19 Shock, (USA: International Monetary Fund, 2021) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

To assess the resilience of India’s corporate sector against COVID-19-related shocks, we conducted a series of stress tests using firm-level corporate balance sheet data. The results reveal a differential impact across sectors, with the most severe impact on contact-intensive services, construction, and manufacturing sectors, and micro, small, and medium enterprises. On policy impact, the results highlight that temporary policy measures have been particularly effective in supporting firm liquidity, but the impact on solvency is less pronounced. On financial sector balance sheets, we found that public sector banks are more vulnerable to stress in the corporate sector, partly due to their weaker starting capital positions. When considering forward-looking multiperiod growth scenarios, we find that the overall corporate performance will depend on the speed of recovery. A slower pace of recovery could lead to persistently high levels of debt at risk, especially in some services and industrial sectors.

Subject: Corporate sector, COVID-19, Economic sectors, Financial sector policy and analysis, Financial statements, Health, Public financial management (PFM), Solvency stress testing, Stress testing

Keywords: Balance sheet data, Corporate sector, COVID-19, Financial statements, Firm liquidity, Firm's ability, Firm's equity, Global, Manufacturing firm, Micro firm, Solvency stress testing, Stress testing

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/278
Stock No:

WPIEA2021278
ISBN:

9781589065871
ISSN:

1018-5941

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