KOLKATA: India was given a 0% CY20 GDP forecast while PM Modi announced a lock-down extension till 3rd of May, 2020, in a televised nation-wide address, today. In a report, the British brokerage, Barclays put out, “As India heads into a longer complete shutdown to combat the rising number of COVID-19 cases, the economic impact looks set to be worse than we had expected earlier.” With this statement, they projected the Indian GDP growth target at 0% in CY20, from an earlier 2.5% GDP while forecasting a GDP growth of 0.8% in FY20, revising the 3.5% GDP that they predicted, before the pandemic hit a global scale. They estimated the economic loss, to be close to $234.4bn (8.1 percent of GDP). This is much higher than the $120bn, they predicted earlier.
This Barclays forecast put India’s GDP growth at its lowest, in more than four decades, since -5.2% in FY1979. The report further added that they expect a weaker profile for recovery given the deteriorating global backdrop while rising risk of COVID-19 outbreaks, although not at the community transmission stage yet, will lead to shutdowns at a local-level. With India having reported 10,550 cases so far, next to a death toll of 358, this comes as a grave warning for the future of our economy.
The investment Bank added that it foresees grave economic losses in Maharashtra, Delhi and other large Industry-driven states, citing the Corona infection cases and the addition lock-down extension, it will necessitate. They predicted that a precautionary increase in savings and reduction of discretionary consumption, like travel and recreational services, will weigh on the growth rates of states with a faster recovery cycle, like Haryana, Kerala and Karnataka.
The bank report stated that they considered the negative impact on essential sectors, like manufacturing, and the modest fiscal stimulus unveiled by our government, while arriving at the numbers. They estimated an end of lock-down by early June with a partial inventory rebuilding due restrained recovery of activities, for their projections. Pessimistically, they cut down the GDP growth projection for FY21 to a 7.5%, from an earlier 8%. They recognized the reliance of the pace of overall growth recovery on our government’s progressive policy-making endeavors, in their report.