New Delhi, May 27: India’s fourth recession since Independence, first since liberalisation, and perhaps the worst to date is here, according to rating agency, Crisil.
CRISIL sees the Indian economy shrinking 5 per cent in fiscal 2021 (on-year), because of the Covid-19 pandemic. The first quarter will suffer a staggering 25 per cent contraction.
About 10 per cent of gross domestic product (GDP) in real terms could be permanently lost. "So going back to the growth rates seen before the pandemic is unlikely in the next three fiscals", Crisil said.
Crisil has revised its earlier forecast downwards. "Earlier, on April 28, we had slashed our prediction to 1.8 per cent growth from 3.5 per cent growth. Things have only gone downhill since", it said.
While we expect non-agricultural GDP to contract 6 per cent, agriculture could cushion the blow by growing at 2.5 per cent.
In the past 69 years, India has seen a recession only thrice as per available data in fiscals 1958, 1966 and 1980. The reason was the same each time a monsoon shock that hit agriculture, then a sizeable part of the economy.
"The recession staring at us today is different," it added. For one, agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. Two, the pandemic-induced lockdowns have affected most non-agriculture sectors. And three, the global disruption has upended whatever opportunities India had on the exports front.
Economic conditions have slid precipitously since the April-end forecast of 1.8 per cent GDP growth for fiscal 2021 (baseline), Crisil said.
On the lockdown extension, it said that the government has extended the lockdown four times to deal with the rising number of cases, curtailing economic activity severely (lockdown 4.0 is ending on May 31).
The first quarter of this fiscal will be the worst affected. June is unlikely to see major relaxations as the Covid-19 affliction curve is yet to flatten in India.
"Not only will the first quarter be a washout for the non-agricultural economy, services such as education, and travel and tourism among others, could continue to see a big hit in the quarters to come. Jobs and incomes will see extended losses as these sectors are large employers," Crisil said.
CRISIL also foresees economic activity in states with high Covid-19 cases to suffer prolonged disruption as restrictions could continue longer.
A rough estimate based on a sample of eight states, which contribute over half of India's GDP, shows that their 'red zones' (as per lockdown 3.0) contributed 42 per cent to the state GDP on average regardless of the share of such red zones.
On average, the orange zones contribute 46 per cent, while the green zones where activity is allowed to be close to normal contribute only 12 per cent to state GDP.
The economic costs are higher than earlier expectations, according to Crisil. The economic costs now beginning to show up in the hard numbers are far worse than initial expectations.
Industrial production for March fell by over 16%. The purchasing managers indices for the manufacturing and services sectors were at 27.4 and 5.4, respectively, in April, implying extraordinary contraction. That compares with 51.8 and 49.3, respectively, in March.
Exports contracted 60.3 per cent in April, and new telecom subscribers declined 35 per cent, while railway freight movement plunged 35 per cent on-year.
"Indeed, given one of the most stringent lockdowns in the world, April could well be the worst performing month for India this fiscal," it said.
Added to that is the economic package without enough muscle. The government recently announced a Rs 20.9 lakh crore economic relief package to support the economy. The package has some short-term measures to cushion the economy, but sets its sights majorly on reforms, most of which will have payoffs only over the medium term.
"We estimate the fiscal cost of this package at 1.2 per cent of GDP, which is lower than what we had assumed in our earlier estimate (when we foresaw a growth in GDP)," it said.
"We believe a catch-up to the pre-crisis trend level of GDP growth will not be possible in the next three fiscals despite policy support. Under the base case, we estimate a 10 per cent permanent loss to real GDP (from the decadal-trend level), assuming average growth of about 7 per cent between fiscals 2022 and 2024," Crisil said.
Interestingly, after the Global Financial Crisis (GFC), a sharp growth spurt helped catch up with the trend within two years. GDP grew 8.2 per cent on average in the two fiscals following the GFC. Massive fiscal spending, monetary easing and swift global recovery played a role in a V-shaped recovery.
To catch-up would require average GDP growth to surge to 11 per cent over the next three fiscals, something that has never happened before.
The research said that successive lockdowns have a non-linear and multiplicative effect on the economy a two-month lockdown will be more than twice as debilitating as a one-month imposition, as buffers keep eroding.
Partial relaxations continue to be a hindrance to supply chains, transportation and logistics. Hence, unless the entire supply chain is unlocked, the impact of improved economic activity will be subdued.
Therefore, despite the stringency of lockdown easing a tad in the third and the fourth phases, their negative impact on GDP is expected to massively outweigh the benefits from mild fiscal support and low crude oil prices, especially in the April-June quarter. "Consequently, we expect the current quarter's GDP to shrink 25 per cent on-year," it said.
Counting lockdown 4.0, Indians have had 68 days of confinement. S&P Global estimates that one month of lockdown shaves 3 per cent off annual GDP on average across Asia-Pacific.
Since India's lockdown has been the most stringent in Asia, the impact on economic growth will be correspondingly larger.
Google's Community Mobility Reports show a sharp fall in movement of people to places of recreation, retail shops, public transport and workplace travel. While data for May shows some improvement in India, mobility trends are much below the average or baseline, and lower compared with countries such as the US, South Korea, Brazil and Indonesia.
Comments
U NEED TO GO THRU STATISTICS... Many girls IN ANOTHER COMMUNITY are threatened and raped before they get to the marriage age from their own family members as well as the saints , most of them are in jails...
Some community girls are used and misused by the men and the girl tolerates b4 the marriage. The drunken men alwz escape with cheddi culture by threatening the young girls and their parents.... Go thru the statistics... It is better to get married and take responsibility of the family if the girl is ready to marry.
Dear Prathima,
You said some communities like under age girls for..,
see my sister, what difference does it make age below 18 to 15. Do they have more power than girls above 18.
does girl become very old if she is above 18. Above 18means usually it can go upto 28.
95% marriage of girls take place between 16-30
May God protect our girls and boys also.
Only the girl can say if she has been raped or not
what about other religion girls starts having sex immediate after puberty? even some try when they enter highschool.
Listen carefully, the above text says :
" Sex with a wife who is under 18yrs of age is rape and therefore a crime. "
It interpretes as child marriage is invalid.
If the marriage is invalid how do they become wife and husband.
So this rule may does not applicable such wife.
This law is not thought through. Judges need the input of psychologists to understand the behaviour of adolescents. There are teenagers today having relationships before 18. Are they going to throw them in jail?
Ridiculous judgement. Marriage is society's way of allowing for the purpose of having children, since the married couple will then have to make the necessary sacrifices to bring up the children. If under 18 is statutory rape then why allow the marriage in the first place? The SC is coming up in many cases with foolish decisions that are against accepted norms and practices. The SC will risk making itself into an impotent body if it does not have a clue on how this is viewed by the people at large.
Underage marriage is still practiced by muslims
Many pedophile worshipers belonging to a piece full community disguising as hindu are venting their anger against this judgement for reasons very well known to all. next we should ban all books / texts /manuals/biographies which eulogizes pedophiles/ pedophilia.
Some community men like young underage girls for . We welcome the order.
Is its applicable only to Hindus or is it also applicable to Muslims? ..I see lot of them getting married at 15year 2 children by 18yrs..
What if the wife does not tell the husband the correct age and inter course is consensual? Later on there is marital discord, can then it be considered as rape?
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