Kerala to pursue legal steps to avail foreign aid, says CM Pinarayi Vijayan

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.

New Delhi, May 6: Taking a cue from states, the Centre announced one of the steepest hikes in duties on petrol and diesel in the recent past, by raising it by Rs 10 and Rs 13 per litre, respectively, in a notification issued late on Tuesday.

Retail prices, however, will see no change as the price hike will be absorbed by oil marketing companies against the fall in crude prices.

Road and infrastructure cess was hiked by Rs 8 for petrol and diesel and the special additional excise duty (SAED) was hiked by Rs 2 per litre and Rs 5 per litre, respectively. While the road cess will only go into the Centre’s coffers, the hike on account of SAED will be passed on to states via devolution at 42 per cent. Hence, the states will get only Rs 0.84 per litre in case of petrol and Rs 2.1 in case of diesel.

The decision comes after several states increased the value added tax (VAT) on petrol and diesel making use of the lower price regime. The Delhi government on Tuesday increased VAT on petrol and diesel to 30 per cent each, from 27 and 16.75, respectively. As a result, the price of petrol in Delhi increased by Rs 1.67 to Rs 71.26 a litre and diesel by Rs 7.10 to Rs 69.29 in Delhi on Tuesday.

Amid falling international crude oil prices, the Centre introduced an enabling provision in March to raise excise duty on petrol and diesel by Rs 8 per litre in the Finance Act. The government had on March 14 raised excise duty on petrol and diesel by? 3 per litre each, which was to help raise an additional ?39,000 crore in revenue annually.

This duty hike included Rs 2 a litre increase in SAED and Rs 1 in road and infrastructure cess. It raised SAED to Rs 10 for petrol and Rs 4 for diesel. The limit has now been increased to Rs 18 a litre in case of petrol and Rs 12 in case of diesel by way of amendment of the Eighth Schedule of the Finance Act.

Economists said the move would impact retail inflation by over half a percentage point at least. “With lower consumption, there was loss of revenue for Centre and states, who earn Rs 6 trillion annually or Rs 50,000 crore monthly from fuel. Amid lockdown in April, the collection must have come down to just Rs 5,000 crore, and this will hold for May.

This means that Centre and states have lost 20 per cent of annual revenue from fuel. Hence, they have hiked duties to recover losses,” said Madan Sabnavis, chief economist, CARE Ratings. He added that the hike will impact inflation by at least 0.6-0.7 percentage points.

According to industry experts, an estimate of the additional government revenue cannot be made as the consumption of petrol and diesel has dropped to 40 per cent of what it was before the lockdown. The duty hike comes following a drop in international crude oil prices in April, owing to lower consumption figures globally. At 11.50 pm on Tuesday, Brent was priced at $30.67 a barrel, while West Texas Intermediate (WTI) crude was seen at $24.36 a barrel. On Monday, the Indian basket of crude oil was priced at $23.38 a barrel, after touching a 15-year low last month.

Mumbai, Feb 17: The Shiv Sena on Monday said the ongoing preparation for the much awaited visit of US President Donald Trump is a reflection of the "slave mentality" of Indians.

Trump's India trip is like the visit of a "Badshah" (emperor), an editorial in Sena mouthpiece 'Saamana' said.

Taking a dig at the construction of a wall on a plot having several slum structures in Ahmedabad ahead of Trump's visit there, the Sena said the US president's trip would neither stop the fall of rupee's value in forex market nor offer betterment to those (slum dwellers) behind the wall.

"Before Independence, British King or Queen used to visit one of their slave nations like India. The kind of preparations going on from taxpayers' money for the arrival of Trump is similar to it. This reflects the slave mentality of Indians," it said.

The Sena also took a swipe at Prime Minister Narendra Modi over the Ahmedabad Municipal Corporation's (AMC) move to build wall on a plot to "hide the slums" on the route through which Trump's convoy would pass.

"Former prime minister Indira Gandhi had once given the slogan 'Garibi Hatao', which was ridiculed for a long time. It seems now Modi's plan is 'Garibi chupao' (hide poverty)," the Marathi publication said.

Is there any financial allocation for such a wall being built in Ahmedabad? Is the US going to offer loan to India to build such walls across the country? it wondered.

"We have heard Trump is going to be in Ahmedabad for only three hours but the wall construction is costing almost Rs 100 crore to the state exchequer," it said.

It is basically a political arrangement between Prime Minister Modi and US President Trump, the Sena claimed.

Last year, 'Howdy, Modi!' (a mega event jointly addressed by the Indian prime minister and Trump) was organised in the US, it noted.

A similar programme, "Kem Chho Trump" (Gujarati expression for how are you Trump), has been now organised (in Ahmedabad) ahead of the US elections, chiefly because of a sizable number of Gujarati people living in America, the Shiv Sena claimed.

"But this visit of President Trump is neither going to stop further fall of rupee in the forex market nor offer betterment to those behind the wall (being built in front of slums in Ahmedabad)," it said.

The Sena said Trump is "not someone very wise or a statesman or someone who cares for the whole world", but he has to be treated with respect as he represents the mighty US.

"Sometimes you have to treat someone with respect to get your things done," it quipped.

The AMC on Friday said the construction of the wall, around four feet in height, was approved much before Trump's Gujarat visit was finalised.

Trump is scheduled to visit Modi's home state Gujarat on February 24.

He will visit the famous Sabarmati Ashram in Ahmedabad and take part in a roadshow with Modi. After that, the two leaders will inaugurate a new cricket stadium in Motera and address a gathering there, with an expected audience of over a lakh people.

While it was earlier speculated that the programme would be called 'Kem Chho Trump', the Ahmedabad Municipal Corporation on Sunday tweeted a series of posters confirming that the event is now christened as 'Namaste Trump', apparently to give it a pan-India appeal.