Business & Finance

COVID-19 To Cause 4% Permanent Loss To India’s GDP: Crisil

India needs to provide a much higher fiscal stimulus to recapture lost ground due to the coronavirus pandemic, as per Crisil Research.

New Delhi| The continuous economic disorder due to novel coronavirus is expected to result in a permanent loss of 4% of GDP for India, as per Crisil Research.

Which means, while eventually the economy is anticipated to revive there will be a certain amount of economic activity that will not be retrieved and this is estimated to be 4% of Gross Domestic Product.

As the chart shows, the black line is the Pre-COVID19 trend of growth. The red line shows how this loss is expected to happen. As the gap in the two lines notes, the blow to economic growth in FY21 will bare even when the economy revives.

Chief Economist at Crisil, Dharmakirti Joshi, said this is more damaging than the impact of the Global Financial Crisis of 2008. As chart 2 shows, India was able to close down on the GDP gap substantially between FY09 and FY11.

Under the base case scenario for COVID-19, this is unlikely to happen. Crisil also gave hints that most assumption for the base case situation have risk inclined towards the downside; meaning, things are more prone to go down from the base scenario.

Also Read: Coronavirus Cases in India Crosses 33000-Mark, Death Toll At 1074

However, India can close the gap and recover all the lost ground by FY24 if the GDP was to grow at an average of 8.5% over the next 3 years, as chart 3 shows. However, this is a feat that has never been accomplished by India, they warned.

Crisil also highlighted that for any such improvement to happen, the fiscal stimulus from the centre has to be much more vital than what is right now.

The current fiscal stimulus of Rs 1.7 lakh crore was announced by the government 36 hours after the start of the nationwide lockdown on March 25.

Crisil called it “inadequate”. Joshi clarified that while it is tough to evaluate the level of stimulus needed at present, the centre would have to step up as when the situations demand.

However, at present, he said that at Rs 3.5 lakh crore stimulus is needed at the very least — that number includes already announced stimulus of Rs 1.7 lakh crore.

Even when the revival happens, the shape and time of recovery will differ across sectors. As such, some like FMCG and Telecom will see only a mild impact and quick comeback, while others like passenger vehicles will see a sharp slump and moderate revival. There will also be sectors that will see a sharp adverse impact and will take a long time to grow; these include sectors such as airlines, hotels and media.

(Input from Indian Express)

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