On Tuesday, CRISIL said that the current recession is India’s fourth recession and perhaps the worst, yet. It predicted a 5% shrinkage in the economy in the current fiscal because of lockdown.
While evaluating India’s GDP, it said, “The first quarter (April to June 2020) will suffer a staggering 25 per cent contraction. It further said, “About 10% 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.”
CRISIL said the recession in the current fiscal is different as agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. On March 25, the Government imposed the first phase of the lockdown. The lockdown extended till May 31, currently in its fourth phase. The lockdown has crippled the economy.
CRISIL: First Quarter- A Washout For The Non-Agricultural Economy
“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 also saw economic activity in states with high COVID-19 cases suffering prolonged disruption as restrictions could continue longer. Stating that the economic costs now beginning to show up in the hard numbers are far worse than initial expectations, it said industrial production for March fell by over 16 per cent, exports contracted 60.3 per cent in April, and new telecom subscribers declined 35 per cent, while railway freight movement plunged 35 per cent on-year.
“Indeed, given one of the most stringent lockdowns in the world, April could well be the worst-performing month for India this fiscal,” it said.
S&P global estimated a 3% shrink in annual GDP in one month of lockdown.
The report further expected a non-agriculture GDP to contract 6%. Whereas, the agriculture sector could improve GDP by growing at 2.5 per cent.
CRISIL mentioned that the package announced has some short-term measures to recover the economy. However, it sets its sights majorly on reforms, most of which will have payoffs only over the medium term.
“We estimate the fiscal cost of this package at 1.2 per cent of GDP,” it said. However, in their earlier estimate, they had lower numbers.