Money & Banking

Workers face income loss of Rs 4.05 lakh crore due to lockdown, SBI report

Our Bureau Mumbai | Updated on April 16, 2020 Published on April 16, 2020

GDP growth estimates trimmed for FY21 from 2.6 per cent to 1.1 per cent


State Bank of India’s economic research department has cut its GDP growth estimates for FY21 from 2.6 per cent to 1.1 per cent, with the possibility of first quarter growth contracting 6 per cent, or more and second quarter witnessing no growth.

This comes in the backdrop of the continuous nation-wide lockdown to stem the spread of COVID-19,

With the lockdown now being extended till May 3 and the Government simultaneously providing some relaxations from April 20, the department, in its report “Ecowrap”, estimated the overall loss for FY21 around Rs 12.1 lakh crore.The lockdown is going to have a significant impact on our macro parameters, it added.

The FY20 GDP growth has been revised downwards from 5 per cent to 4.1 per cent, the report said.

Lockdown: Loss to workers

Ecowrap estimated that the income loss per day of 37.3 crore workers (self-employed, regular and casual workers) due to the lockdown at 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.” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

The report emphasised that as its GDP forecasts change, fiscal estimates will also change accordingly. It estimated that net tax revenue will see a shortfall of at least around Rs 4.12 lakh crores, and revenue shortfall for states will be Rs 1.32 lakh crores.

The department assessed that the revised fiscal deficit would be at 5.7 per cent of GDP (budget estimate of 3.5 per cent FY21) and after taking into account only the current EBR (extra budgetary resources), the deficit rises to 6.6 per cent of GDP. The fiscal deficit of the States will rise to 3.5 per cent of GDP from the budgeted 2 per cent 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.

“The consolidated fiscal deficit might rise to 10 per cent of GDP on an unchanged EBR,” the report said.

A 4 per cent slippage in nominal GDP that the department is factoring in is tantamount to Rs 8 lakh crore of fiscal support (Rs 2 lakh crores = 1 per cent of GDP) and this should be recommended benchmark, it added.

Apart from monetization of deficit, the report suggested that the other option for financing fiscal deficit is to go for tax free bonds as they are good for investors for earning regular, tax-free income and also gives tax deductions under Income tax Act. Considering the current market appetite, it recommended issuance of short maturity tax-free bonds, which will be a hit with markets.

Published on April 16, 2020

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