The economic activity will have a deep impact due to the extension of lockdown by the Government of India. A foreign brokerage said that India’s GDP forecast sharply cuts to a contraction of 2% in this financial year.
This estimated data has been collected with the assumption that the lockdown will extend to mid of July and the stretch to boost the economy will start from the month of August according to the analysts of Bank of America Securities.
Economic impact of the COVID-19 Pandemic in India
RBI has also expected the economy to be contract in FY21 (2020-2021), but has not gave any point on it. Some analyst has also estimated the contraction up to 5%. The Central Government has re-opened the parts of the economy from 1st of June, while continuing the lockdown due to COVID-19 on the effected parts of the economy that contributes over 60% of the economy.
“The government has extended the national lockdown to June 30 with some further relaxation as Unlock 1.0. The analyst have estimated that the month’s slowdown will cost 1-2% of the whole GDP and with the restart of six weeks to shave off 0.60%.”
It has now been expected the GDP to be contract by 2%, 0.70% wider than the previous estimate. The brokerage was so quick to add that if the lack of the vaccines forces the government to continue with the semi-lockdown routine, then the economy will contract as 5%.
The brokerage to revise up the fiscal deficit by 0.50% to 6.3% as against 4.6% achieved in FY20 with the sharp reduction in the GDP contraction. The analysts have also estimated that by adding wider fiscal deficit will be a result of lower tax collection as they believe that higher fiscal spend is the hour needed.
At the consolidated level, the fiscal deficit will be coming between 9.9-10.4% of the GDP. The government will fund wider fiscal deficit through $13.3 billion increase to the open market operations by RBI to $88.5 billion, said by the analysts.
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