The amount of havoc the Covid-19 outbreak and all the measures that have been imposed in place to curb it wreaked on India’s economy is astounding. Since going into the 21-day lockdown almost all businesses big or small have come to an absolute standstill.
Recently, on Thursday, Acuite Ratings & Research Ltd, a credit rating agency, reported that due to the nationwide lockdown, Indian economy now stands to lose a whopping $4.64 billion every single day. It was also reported that for the entire duration of the 21-day lockdown loss in GDP will amount to nearly $98 billion.
“While the countrywide shutdown is scheduled to be lifted from April 15, 2020, the risks of prolonged disruption in economic activities exist depending on the intensity of the outbreak,” the credit rating agency said in a statement. The ongoing disruption, it said, will have a significant economic consequence across the world and also in India.
In 2020, a global recession has already been forecast by the International Monetary Fund aka IMF.
Sankar Chakraborti, Chief Executive Officer – Acuite Ratings & Research, said that the agency employed various methods to assess estimates for Q1 FY’21 GDP and has discovered that there’s a high probability that it might contract up to an extent of 5% to 6% compared to that of the 5% estimated growth in the pre-outbreak situation.
He further added that his agency holds the opinion that transport, hotel, restaurant, and real estate industry would be affected the most. GVA (gross value added) loss in these sectors would be at around 50% which subsequently accounts for around 22% in overall GVA in Q1 of FY21.
On the other hand, sectors which are more likely to see a lot of activity during these times are communication, broadcasting, and healthcare. However, combined, they only contribute a meagre 3.5% in the overall GVA.
Except for pharmaceutical, gas, electricity and medical devices which account for around 5% of GVA, the effects of the lockdown have been very adverse when it comes to industrial activities which are all set to observe a significant contraction in Q1 of FY21.
Karan Mehrishi, Lead Economist, Acuite Ratings & Research said: “The agricultural sector which accounts for 15 percent of GVA, is nonetheless, expected to see continuing activity even in the lockdown period; however, the allied activities are partly impacted as livestock and fisheries are experiencing mute demand due to the Covid-19 concerns.”
Recovery Projections For The GDP Growth Rate
Throwing light on the recovery side, Acuite has stated that a quick recovery in the domestic economic activities is likely to be observed only in H2 (October 2020 – March 2021) which in turn may benefit from huge fiscal and monetary measures together with oil prices lowering down globally.
They also mentioned that taking into account significant economic revival in the H2 of the FY’21, the overall GDP of India is expected to grow in the range of 2% -3% for FY21 (April 2020 to March 2021).
However, as per the analysis done by the United Nation, which they revealed on Thursday, the global economy could shrink by 1% in 2020 due to Covid-19 outbreak. The analysis by the UN Department of Economics and Social Affairs (DESA) said that the deadly pandemic is disrupting global supply chains and international trade as nearly 100 countries have closed their national borders in the last one month.