Nationwide lockdown may shrink India’s GDP by this much in Q1; SBI gives hope for Q2

The SBI Ecowrap report has estimated that Q3 and Q4 growth numbers could look much better, with an average of 6 per cent.

A major fall in economic activities due to the coronavirus-led nationwide lockdown in the first quarter of the current fiscal may cause the quarterly GDP to nosedive. The contraction in the Q1 FY21 GDP may be as high as 40 per cent, said the SBI Ecowrap report. Stating the possibility of a smart recovery in the Q2 GDP of up to 7.1 per cent on the back of the country’s ability to sustain the demand, SBI Chief Economist Soumya Kanti Ghosh said that GDP loss in Q1 FY21 will be humongous and could even exceed 40 per cent. 

Two out of three months of the first quarter have witnessed a nationwide lockdown and the slight hopes of recovery are for June as the government has decided to lift the lockdown by the end of May. Even as the government had partially allowed economic activities from April 20, disruption in overall businesses and supply chains did not let the economy to rebound. 

Also Read | Covid-19: Catch up to trend-GDP difficult in three years

Though the outlook for the first quarter is highly pessimistic, expectations from the second quarter are giving some relief. The SBI Ecowrap report has estimated that Q3 and Q4 growth numbers could look much better, with an average of 6 per cent, but the Q2 bump could come down with the immediate fall in demand in Q2 subsiding subsequently. The report has also given a state-wise analysis that indicates that the top 10 states accounted for 75 per cent of total GDP loss with Maharashtra contributing 15.6 per cent of total loss followed by Tamil Nadu (9.4 per cent) and Gujarat (8.6 per cent). 

Meanwhile, the GDP figures of the Q4 FY20 is due on May 29 and the speculations are that the growth will be near 2 per cent due to coronavirus pandemic superimposed on the prolonged slowdown that India was suffering in the last year. Recently, RBI Governor Shaktikanta Das has also said that India’s GDP will shrink in the current fiscal year.

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