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Last Updated : Apr 16, 2020 09:29 PM IST | Source: PTI

Economic growth may fall to 1.1% this fiscal: SBI Ecowrap report

According to the SBI Ecowrap report, the extension of the lockdown would result in economic loss of Rs 12.1 lakh crore or 6 percent of the nominal Gross Value Added (GVA).

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India's GDP growth may slide to 1.1 percent in the current financial year, on account of the impact of coronavirus outbreak on the economy, a research report by SBI said on Thursday.

The economic growth rate during 2019-20 is estimated to come down to 4.1 percent from 5 percent projected by several agencies before the outbreak of deadly virus, which affected more than 20 lakh persons around the world and took lives of over 1.3 lakh people.

In order to check the spread of COVID-19, the government has decided to extend the lockdown to May 3, with some relaxations for specified sectors.


According to the SBI Ecowrap report, the extension of the lockdown would result in economic loss of Rs 12.1 lakh crore or 6 percent of the nominal Gross Value Added (GVA).

"With the lockdown now being extended till May 3 and simultaneously Government providing some relaxations from April 20, we estimate the overall loss for FY21 around Rs 12.1 lakh crore/6 percent of nominal GVA taking the nominal GVA growth for entire year to be around 4.2 percent.

"Nominal GDP for FY21 could be lower/closer to 4.2 percent, as there is a strong possibility of subsidies outstripping tax collections. However, taking nominal GDP growth at 4.2 percent, the real GDP growth for FY21 would be around 1.1 percent," said the report.

The lockdown, the report said, will have a significant impact on several macroeconomic parameters.

Quoting PLFS survey 2017-18, the report said, there are 37.3 crore workers engaged as self-employed, regular and casual workers, with share of self employed at 52 percent, casual worker at 25 percent and the rest engaged as regular wage earners and others.

"We estimate the income loss per day of these 37.3 crore workers due to lockdown is around Rs 10,000 crore, which translates into a loss of Rs 4.05 lakh crore for the entire lockdown period. For causal labourers, this income loss it at least Rs 1 lakh crore. Thus any fiscal package should at least strive to more than make up for this Rs 4 lakh crore income loss," it added.

Secondly, "as our GDP forecasts change, fiscal estimates will also change accordingly. Net Tax Revenue will have a shortfall of at least around Rs 4.12 lakh crores, and Revenue shortfall for states will be Rs 1.32 lakh crores. The revised fiscal deficit would be at 5.7 percent of GDP and after taking into account only the current EBR the deficit rises to 6.6 percent of GDP," it noted.

The fiscal deficit of the states is expected to rise to 3.5 percent of GDP from the budgeted 2 percent in FY21.

"We estimate that the EBR number will rise significantly as Government will try to mobilise resources more through unconventional means like COVID Bonds, monetisation of deficit and others," as per the report.

The consolidated fiscal deficit might rise to 10 percent of GDP on an unchanged EBR, it said, adding a 4 percent slippage in nominal GDP tantamount to Rs 8 lakh crore of fiscal support.
First Published on Apr 16, 2020 09:10 pm