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3 Apr, 2020 10:00

Nationwide lockdown could cost Indian economy over $4 BILLION A DAY

Nationwide lockdown could cost Indian economy over $4 BILLION A DAY

The 21-day complete shutdown across India which was triggered by the rapid spread of the coronavirus outbreak will result in a gross domestic product (GDP) loss of almost $98 billion, according to Acuite Ratings & Research.

“While the countrywide shutdown is scheduled to be lifted from April 15, 2020, the risks of prolonged disruption in economic activities exist depending on the intensity of the outbreak,” the credit rating agency said, adding that the ongoing disruption will have significant economic consequences across the world as well as in India.

Acuite Ratings has warned there is a risk of a contraction of April-June (2020-21 fiscal) GDP to the extent of between five and six percent, with Q2 (July-September) likely to post modest growth in a best-case scenario.

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According to the agency’s estimates, “every single day of the nationwide lockdown will cost the Indian economy almost $4.64 billion,” said Sankar Chakraborti, CEO of Acuite Ratings & Research.

Transport, hotel, restaurant, and real estate activities were named among the most severely impacted sectors. “In our opinion, there would be at around 50 percent GVA (gross value added) loss in these sectors, which account for around 22 percent in overall GVA, in Q1 of FY21,” the rating agency said.

On the other hand, communications, broadcasting, and healthcare are expected to see boosted activities during the crisis. However, with a 3.5 percent share, their contribution to the overall GVA will be small. The impact of the lockdown is projected to be severe on some industrial activities, while the agricultural sector – which accounts for 15 percent of GVA – is “nonetheless expected to see continuing activity even in the lockdown period.”

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Acuite estimated that the second quarter may show moderately positive growth of just under three percent on the back of the expected normalization process. It also expects a quick recovery for domestic economic activities in the second half of the fiscal year – which may, in turn, benefit from the increased fiscal and monetary measures, along with lower global oil prices.

According to India’s Ministry of Health and Family Welfare, the total number of cases has now reached 2,567, including 156 recoveries and 72 deaths.

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