Check Credit Score
Check Credit Score
HomeNewsIndia

Economic growth may fall to 1.1% this fiscal: SBI Ecowrap report

According to the SBI Ecowrap report, the extension of the lockdown would result in economic loss of Rs 12.1 lakh crore or 6 percent of the nominal Gross Value Added (GVA).

April 16, 2020 / 09:29 PM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

India's GDP growth may slide to 1.1 percent in the current financial year, on account of the impact of coronavirus outbreak on the economy, a research report by SBI said on Thursday.

The economic growth rate during 2019-20 is estimated to come down to 4.1 percent from 5 percent projected by several agencies before the outbreak of deadly virus, which affected more than 20 lakh persons around the world and took lives of over 1.3 lakh people.

In order to check the spread of COVID-19, the government has decided to extend the lockdown to May 3, with some relaxations for specified sectors.

According to the SBI Ecowrap report, the extension of the lockdown would result in economic loss of Rs 12.1 lakh crore or 6 percent of the nominal Gross Value Added (GVA).

"With the lockdown now being extended till May 3 and simultaneously Government providing some relaxations from April 20, we estimate the overall loss for FY21 around Rs 12.1 lakh crore/6 percent of nominal GVA taking the nominal GVA growth for entire year to be around 4.2 percent.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

"Nominal GDP for FY21 could be lower/closer to 4.2 percent, as there is a strong possibility of subsidies outstripping tax collections. However, taking nominal GDP growth at 4.2 percent, the real GDP growth for FY21 would be around 1.1 percent," said the report.

The lockdown, the report said, will have a significant impact on several macroeconomic parameters.

Quoting PLFS survey 2017-18, the report said, there are 37.3 crore workers engaged as self-employed, regular and casual workers, with share of self employed at 52 percent, casual worker at 25 percent and the rest engaged as regular wage earners and others.

"We estimate the income loss per day of these 37.3 crore workers due to lockdown is 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," it added.

Secondly, "as our GDP forecasts change, fiscal estimates will also change accordingly. Net Tax Revenue will have a shortfall of at least around Rs 4.12 lakh crores, and Revenue shortfall for states will be Rs 1.32 lakh crores. The revised fiscal deficit would be at 5.7 percent of GDP and after taking into account only the current EBR the deficit rises to 6.6 percent of GDP," it noted.

The fiscal deficit of the states is expected to rise to 3.5 percent of GDP from the budgeted 2 percent 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," as per the report.

The consolidated fiscal deficit might rise to 10 percent of GDP on an unchanged EBR, it said, adding a 4 percent slippage in nominal GDP tantamount to Rs 8 lakh crore of fiscal support.

first published: Apr 16, 2020 09:10 pm

Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!

Advisory Alert: It has come to our attention that certain individuals are representing themselves as affiliates of Moneycontrol and soliciting funds on the false promise of assured returns on their investments. We wish to reiterate that Moneycontrol does not solicit funds from investors and neither does it promise any assured returns. In case you are approached by anyone making such claims, please write to us at grievanceofficer@nw18.com or call on 02268882347