Comments
CRISIL Research has stated that the current coronavirus pandemic could lead to a four per cent permanent loss to real Indian gross domestic product (GDP) and said that more fiscal stimulus will be required.
Most economies across the globe are unlikely to see normal conditions until 2022 due to the current coronavirus pandemic and the containment measures, according to CRISIL Research.
“Base case GDP growth expected at 1.8 per cent for fiscal 2021. Risks tilted towards the downside scenario of zero GDP growth,” CRISIL Research said, adding that fiscal support needs to go up in scale and scope beyond vulnerable households to cover firms as well.
“External vulnerability low with current account deficit projected 0.2 per cent of GDP and adequate forex reserves, but domestic vulnerability indicators worsening,” it further said.
“GDP growth may go towards 0 in 2020-21 if lockdown is extended. There will be four per cent permanent loss to GDP, and the economy is unlikely to recover for the next three years,” noted DK Joshi, Chief Economist, CRISIL on Thursday, adding that the government will also need to work on more fiscal stimulus measures.
Joshi added that the fiscal policy will need to be flexible as well as responsive and must consider top-up welfare measures to address household income disruptions of the vulnerable - in cash and kind. The policy must also provide more support for businesses, particularly small and medium enterprises (SMEs) via direct support and guarantees.
Joshi said that fiscal measures could end up requiring about Rs 3.5 trillion in funds.
However, the catch up with GDP would be unlikely even if India grows by seven per cent from fiscal year 2022. The economy would have to grow at an extraordinary 8.5 per cent GDP growth between FY 2022 and 2024
In a teleconference to discuss the Covid-19 impact on economy and corporates, Shaun Roache, Chief Asia-Pacific Economist S&P Global Ratings said that some recovery is likely from the third quarter.
“We assume first-wave containment by end of the second quarter, complicated transition, and medical resolution mid-2021. Policies are a bridge to the (eventual) recovery,” he said.
Prasad Koparkar, Senior Director, CRISIL Research warned that India Inc log is set to log its worst performance in a decade due to the pandemic with discretionary segments and construction to be hit the hardest.
Gross non-performing assets (NPAs) of banks could rise to 11 to 11.5 per cent this fiscal from about 9.5 per cent last fiscal and slippages will be high. The agency does not expect any major NCLT resolution this fiscal.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.