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, which also warned that it could lead to a four per cent permanent loss to real Indian GDP as it called for more fiscal stimulus.

“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.

“We see a permanent loss of about 4 per cent of GDP. Fiscal 2022 is likely to see a V-shaped recovery at over 7 per cent real GDP growth. But even assuming growth sustains at this level for the next three years, real GDP will stay below its pre-Covid-19 trend path,” noted DK Joshi, Chief Economist, Crisil on Thursday, adding that the government will also need to work on more fiscal stimulus measures.

Fiscal stimulus measures could end up requiring about ₹3.5 trillion.

Fiscal policy will need to be flexible and responsive and consider top up welfare measures to address household income disruptions of the vulnerable in cash and kind as well as more support for businesses, particularly SMEs via direct support and guarantees.

The economy would have to grow at an extraordinary 8.5 per cent GDP between FY 2022 and 2024 for any kind of catch up.

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 is set to log its worst performance in a decade due to the pandemic and Ebitda is set to fall sharply – by over 15 per cent in the base case scenario.

Gross non-performing assets of banks could rise to 11-11.5 per cent this fiscal from about 9.6 per cent as on March 2020 and slippages will be high. The agency does not expect any major NCLT resolution this fiscal. NPAs are expected to swell for non-banking finance companies, too with microfinance, MSME loans and wholesale/developer funding witnessing the sharpest spike.

In the year ahead, Crisil expects consumer discretionary services and products such as airlines, hotels, automobiles and consumer durables to be the worst-hit. Non-pharma exporters, real estate and construction companies also face one of their worst years.

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