Aggressive lockdown may shave off growth to 2.5%: Barclays

Reserve Bank of India (RBI). (File Photo: IANS)

March 25, 2020
New Delhi: Government’s stringent and aggressive move of a full three-week lockdown, across the entire country to contain spread of novel coronavirus will much sharper impact on country’s GDP in the April -June quarter that what was previously anticipated, Barclays said in a research report finalised after Prime Minister Narendra Modi’s speech to the nation on Tuesday evening.

In view of the changed circumstances, the bank has shaved down its calendar year (CY) 2020 GDP forecast for India from earlier 4.5 per cent to 2.5 per cent now and FY20-21 forecast to 3.5 per cent from 5.2 per cent earlier.

But Barclays has also projected a recovery and rebound in CY 2021 with GDP growing by 8.2 per cent and 8.0 per cent in FY21-22.

“In our baseline assumption, we now factor in four full weeks of a complete shutdown, followed by another eight weeks of partial shutdowns across the country until the end of May (of which one week has passed already), as the COVID-19 related precautions will likely remain in the system,” Rahul Bajoria, Chief India Economist, Barclays wrote in a note justifying the sharp revisions.

The bank has estimated that cumulative shutdown costs in India will be around $120 billion or 4 per cent of GDP. Of the $120 billion, the new shutdown assumptions account for roughly $90 billion of additional impact. This would roughly translate to around 2pp of a loss in output, and as a result GDP growth has been shaved off.

The bank note said that to cover up anticipated slowdown they expect the RBI to undertake larger, and deeper rate cuts than the 65 bps we have factored in so far.

“We now see the RBI moving close to 65bps at its April policy meeting, and believe an additional 100bps of cuts is needed to stabilize market sentiment between the June-August policy meetings (165bp cumulatively to take rates to 3.5 per cent), along with outright bond purchases through OMOs, possible forbearance for bank loans and targeted liquidity windows for banks and NBFCs, the bank said.

Along with anticipated slowdown in GDP growth, Barclays said that the government’s fiscal targets are unlikely to be met, and the clause for managing natural calamities is likely to be invoked to find fiscal space.

This may even entail the RBI directly placing funds with the government, but we wait for more clarity on this issue. Nonetheless, we raise our fiscal deficit projections to 5.0 per cent of GDP (from 3.5 per cent previously), factoring in some anticipatory fiscal spending of 50bp of GDP, while also accounting for 100bp of slippage on account of weaker growth. This will push the consolidated fiscal deficit to 8.2 per cent of GDP, with risks clearly biased upwards, the bank said. IANS

US court orders Byju’s to freeze $533 million owed to lenders

New York: The steering committee representing term-loan lenders of Byju's $1.2 billion loan on Friday said that a US judge has ordered to prohibit further movement or use of $533...

Strong demographic trend a structural positive for India: Morgan Stanley

New Delhi: India’s demographic trend of a younger workforce positions it positively as most large economies face shrinking working-age populations and tight labour markets, global brokerage, Morgan Stanley said. Per...

EAM Jaishankar calls FTA with four European nations ‘a bold achievement’

New Delhi: Calling the signing of the India-EFTA Trade and Economic Partnership Agreement (TEPA) a "bold achievement", External Affairs Minister S. Jaishankar said on Sunday that the move reflects a...

India has 8,000 startups led by women with $23 bn in funding: Report

New Delhi: India is now home to more than 8,000 startups that have women founders with a cumulative funding of nearly $23 billion till now, a report showed on Thursday....

RBI’s punitive actions will keep NBFCs on the edge

New Delhi: In continuation with its system clean-up mission, the RBI imposed an embargo on IIFL’s gold loan business on March 4 and on JM Financial Products’ (subsidiary of JM...

India aims 5-fold increase in global space economy share: Union Minister

New Delhi: After Prime Minister Narendra Modi took the decision to “unlock” the space sector from the “veil of secrecy”, the country is now targeting a five-fold increase in its...

Interoperable payment system for Net banking to be launched this year: RBI chief

Mumbai: RBI Governor Shaktikanta Das on Monday said that the interoperable payment system for internet banking is expected to be launched this year to facilitate quicker settlement of funds for...

Moody’s ups India’s growth forecast, expects policy continuity after LS polls

Mumbai: Moody's Investor Service on Monday raised India’s GDP growth forecast and expects the country to remain the fastest growing economy among the G-20 nations in 2024. "India's economy has...

India okays rice exports to Africa in outreach to Global South

New Delhi: The government has, as part of India's outreach to the Global South, allowed the exports of 1,10,000 tonnes of rice to three African countries to help them meet...

Reinstate Bharatmatrimony, Info Edge, Shaadi.com, TrulyMadly: IAMAI tells Google

New Delhi: The Internet and Mobile Association of India (IAMAI) on Saturday slammed removal of Indian companies' apps and asked Google to reinstate those delisted apps on its Play Store....

Delhi’s per capita income increases: Economic Survey report

New Delhi: Delhi’s Gross State Domestic Product (GSDP) at current prices during the fiscal year 2023-24 is projected to soar to Rs 11,07,746 crore, marking a notable growth of 9.17...

Sensex jumps more than 1,000 points on impressive GDP numbers

New Delhi: BSE Sensex jumped more than 1,000 points on Friday reacting to India’s impressive GDP numbers. Sensex was trading up by 1045.99 points up by 1.44 per cent at...

Read Previous

Corona cases cross 560 mark in India

Read Next

Facebook’s ad business weakens in nations hit by COVID-19

Leave a Reply

Your email address will not be published.

WP2Social Auto Publish Powered By : XYZScripts.com