On July 12, Ficci in its Economic Outlook said, “Survey has projected the country’s annual median GDP growth for 2020-21 at (-) 4.5 per cent. With the rapid spread of COVID-19 pandemic manifesting into an economic and healthcare crisis globally, the latest forecast marks a sharp downward revision from the growth estimate of 5.5 per cent reported in the January 2020 survey”.
The lockdown imposed by the government to stop the spread of COVID Pandemic has severely disrupted economic activities. Though, the lockdown restrictions are gradually being uplifted for economic rebound.
On July 11, RBI Governor Shaktikanta Das in SBI Banking and Economics Conclave said, “The Indian economy has started showing signs of getting back to normalcy in response to the staggered easing of restrictions. It is, however, still uncertain when supply chains will be restored fully; how long will it take for demand conditions to normalise; and what kind of durable effects the pandemic will leave behind on our potential growth”.
In May, RBI has forecasted negative GDP growth for the current fiscal year.
Ficci added,“The present round of ‘Economic Outlook Survey’ was conducted in June 2020 and drew responses from leading economists representing industry, banking and financial services sector. The latest round of Ficci’s Economic Outlook Survey puts forth an annual median GDP growth forecast for 2020-21 at (-) 4.5 per cent – with a minimum and maximum growth estimate of (-) 6.4 per cent and 1.5 per cent respectively for 2020-21″.
According to the survey, the quarterly median forecasts predict GDP growth to slump by (-) 14.2 per cent in the first quarter of 2020-21, with a minimum estimate of (-) 25 per cent and a maximum estimate of (-) 7.4 per cent. Economic activity-wise annual forecast predicted a 2.7 per cent of median growth for agriculture and allied activities in current fiscal year.
The industry chamber said, “Agriculture seems to be the only sector with a silver lining right now. There is an apparent upside as far as the performance of monsoon is concerned this year and the water reservoir levels in the country stand at good levels”.
According to the survey, “the rural sector supported by a steady agriculture performance and hopefully a contained number of COVID-19 cases will be a key demand generator for India this year. Industry and services sector, on the other hand, are expected to contract by 11.4 per cent and 2.8 per cent, respectively in 2020-21. Weak demand and subdued capacity utilisation rates were already manifesting into a drag on investments and the COVID-19 pandemic has further extended the timeline for recovery”.
It added, “Even though activity in sectors like consumer durables, FMCG is gaining traction, majority of the companies are still operating at low capacity utilisation rates. Labour availability and feeble demand remain as major issues for the companies. Therefore, fresh investments will be difficult to come by in the near to medium term. Also, a significant change in consumption patterns is expected on back of uncertainty with regard to jobs and income losses. With demand and investment outlook muted, robust government expenditure has been the only saviour. Nonetheless, growth is likely to bottom out post the second quarter of the current fiscal year”.
According to the survey, “some of the stimulus measures are reaching to the ground – especially through the credit guarantee scheme for MSMEs and support through MGNREGA – which is positive.”
In the context of stimulus package 2.0, it said, “while the quasi fiscal measures and structural reforms announced were undoubtedly steps in the right direction, on-ground implementation and results will take a long time to work through in the present environment”.
Some participants expect that “RBI would undertake further cuts in the repo rate going forward to minimise the economic shock and stabilise financial markets”.
While the majority said, “cutting interest rates would not pump economic growth given that the demand conditions have remained subdued from even before the COVID pandemic struck the economy.”
According to Ficci, ” Efforts towards liberalisation of FDI policy must be complemented with improving infrastructure and ease of doing business in the country”.