Growth could be lowest in several decades

Growth could be lowest in several decadesThe national lockdown in the wake of Covid-19 has come at a huge cost. India’s growth projections for the current year—both calendar and financial—have been drastically slashed by several rating agencies and economic think tanks.

As Prime Minister Narendra Modi yesterday extended the lockdown till May 3, investment bank Barclays slashed India’s growth projections for calendar year 2020 to nil from an earlier estimate of 2.5 per cent.

“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,” Barclays in its report said. According to Barclays’ estimate, the economic loss would be close to $234.4 billion which is over 8 per cent of GDP.

The International Monetary Fund (IMF) too sharply reduced the growth projection for India. From an earlier 5.8 per cent growth projection made in January, IMF slashed it to 1.9 per cent for the financial year 2020-21. The multilateral agency, warning that the economic impact of coronavirus spread could be as bad as the Great Depression of 1930, also predicted a contraction of 3 per cent in global GDP growth.

Rating agency ICRA reduced India’s FY21 growth forecast between -1 per cent to 1 per cent. The country’s GDP could contract by 10-15 per cent in the first quarter, it said.

According to the World Bank, India’s growth rate in FY21 India could be anywhere between 1.5 per cent and 2.8 per cent, lowest in around three decades.

Meanwhile India has not yet announced a comprehensive economic stimulus package. Last month, Finance Minister Nirmala Sitharaman announced a Rs 1.7 lakh crore or about $26 billion relief package for the poor, mainly those working as daily wage earners.

Many economists and think tanks too indicated that they would be revising their growth projection for the country.

The challenge now for the government is to somehow revive the economy and not be guided by the fiscal consolidation roadmap..