The prolonged period of growth slowdown caused by the COVID-19 crisis may adversely impact the external sector metrics, specifically the rupee, which is currently at a comfortable position due to subdued prices of crude oil in the international market, a report stated on Monday.

“We should be mindful of our external sector in 2020-21 as a prolonged period of growth slowdown could impact the external sector metrics, specifically the rupee,” a report published under SBI’s research Ecowrap, said.

“In FY21, we maintain that India is going to achieve a current account surplus owing to lower oil prices, although the magnitude might shrink if oil prices show undue volatility and stay at over $40 /bbl for a sufficiently longer period of time,” it added.

In 2020-21, the report maintains that India is going to achieve a current account surplus owing to lower oil prices, although the magnitude might shrink if oil prices show undue volatility and stay at over USD 40 /bbl for a sufficiently longer period of time, it said.

“We are facing similar growth challenges now, with GDP growth declining from 8.3% in FY17 to 4.2% in FY20. The FY21 median growth contraction is currently at 5%, indicating a growth collapse of at least 9% from FY20 levels because of COVID. The only saving grace is that our external debt position is sustainable with the external debt to GDP ratio at 19.8% at end-June 2019.”

On COVID-19, the report said India was testing less than 1 lakh samples per day till May 18. This has consistently topped 1 lakh testings per day since then with minor exceptions.

For the first seven days of June, India has tested on an average 1.32 lakh samples, with the number crossing 1.4 lakhs on June 6 and June 7.

“This is perhaps the reason why the cases have started increasing at a much faster rate,” it said.

Indian states and the centre have formally decided to open up the economy beginning Monday.

“The positivity rate has now moved up to 7 per cent in the first 7 days of June from an average of 4.7 per cent during March 27 till May 31. Based on the current 7-days moving average of new cases witnessed in India, we now believe that peak of new cases will get pushed back further and is likely to peak somewhere anytime in the second half of July. But this is based purely on current assessment, that can rapidly change.”

“Clearly, the increased positivity rate is a reflection of more number of tests and if we look at the accompanying graph, the positivity rate clearly shows a decisive uptrend from May 2 onwards,” it added.

At this rate, if India doubles the number of tests, the number of positive cases on a daily basis will remain in double digits from now on and this should not come as a surprise, the report said.

Meanwhile, based on the current 7-days moving average of new cases witnessed in India, we now believe that peak of new cases will get pushed back further from earlier estimates towards the end of June and is likely to peak somewhere anytime in the period after July 7, it said.

Following that the new cases are expected to witness steep fall till the end of August after which it is expected to flatten only by mid-September, it said.

However, these are purely based on an assessment of current trends that can rapidly change, it added.