COVID-19 Impact: India facing worst recession since Independence; economy to shrink by 5% in current fiscal, says CRISIL – Firstpost

New Delhi: India’s fourth recession since Independence, the primary since liberalisation and maybe the worst to date, is right here, CRISIL mentioned on Tuesday because it predicted the economy to shrink by 5 p.c in the current fiscal due to coronavirus lockdown.

“The first quarter (April to June 2020) will suffer a staggering 25 percent contraction. About 10 percent of gross domestic product (GDP) in real terms could be permanently lost. So going back to the growth rates seen before the pandemic is unlikely in the next three fiscals,” it mentioned in its evaluation of India’s GDP.

In the previous 69 years, India has seen a recession solely thrice – as per out there knowledge – in fiscals 1958, 1966 and 1980. The cause was the identical every time – a monsoon shock that hit agriculture, then a sizeable a part of the economy.

CRISIL mentioned the recession in the current fiscal (April 2020 to March 2021) is completely different as agriculture might soften the blow this time by rising close to its pattern fee, assuming a traditional monsoon. The coronavirus lockdown, first imposed on March 25 and prolonged thrice until May 31, has curtailed financial exercise severely. “The first quarter of this fiscal will be the worst affected,” it mentioned.

“Not only will the first quarter be a washout for the non-agricultural economy, services such as education, and travel and tourism among others could continue to see a big hit in the quarters to come. Jobs and incomes will see extended losses as these sectors are large employers,” it mentioned.

It additionally noticed financial exercise in states with excessive COVID-19 instances struggling extended disruption as restrictions might proceed longer. Stating that the financial prices now starting to present up in the exhausting numbers are far worse than preliminary expectations, it mentioned that industrial manufacturing for March fell by over 16 p.c, exports contracted 60.three p.c in April, and new telecom subscribers declined 35 p.c, whereas railway freight motion plunged 35 p.c on-yr.

“Indeed, given one of the most stringent lockdowns in the world, April could well be the worst-performing month for India this fiscal,” it mentioned. Counting lockdown 4.0, Indians have had 68 days of confinement.

S&P Global estimates that one month of lockdown shaves three p.c off annual GDP on common throughout Asia-Pacific, it mentioned including since India’s lockdown has been essentially the most stringent in Asia, the influence on financial development can be correspondingly bigger.

“CRISIL forecasts India’s GDP growth to fall off a cliff and contract 5 percent in fiscal 2021. Earlier, on 28 April, we had slashed our prediction to 1.8 percent growth from 3.5 percent growth. Things have only gone downhill since. While we expect non-agricultural GDP to contract 6 percent, agriculture could cushion the blow by growing at 2.5 percent,” the report mentioned.

On the Rs 20.9 lakh crore financial aid package deal introduced by the federal government to help the economy, CRISIL mentioned the package deal has some brief-time period measures to cushion the economy however units its sights majorly on reforms, most of which may have payoffs solely over the medium-time period.

“We estimate the fiscal cost of this package at 1.2 percent of GDP, which is lower than what we had assumed in our earlier estimate,” it mentioned.

Updated Date: May 27, 2020 06:59:34 IST

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