Hyderabad: Economic research agencies are projecting that GDP growth of several economies is going to be impacted due to the Coronavirus pandemic. India, like other countries will see effect on private and government consumption, production, investments and job, leading to a decline in its GDP growth.
For the fiscal FY 2019-20, India’s growth may just be about 4.4 per cent, considering the estimates for the first three quarters and assumptions for the fourth quarter’s year-on-year growth rate.
“Based on estimates on how government, business and individuals are likely to respond to emerging situation, private consumption for the fourth quarter (January-March) could grow by 2 per cent, as the growth for the first three quarters stood at 5.5 per cent. Government consumption could grow by 10 per cent, with the average growth rate for the first three quarters being close to 11.3 per cent. We don’t expect any contribution to GDP through inventory build-up, as inventory is most likely expected to decline, given the production disruption,” Anil K Sood, co-founder of the Hyderabad-based Institute for Advanced Studies in Complex Choices (IASCC) told Telangana Today.
He added, “Given that the oil prices have fallen dramatically, and we have a global trade lock-down, I don’t expect net exports to contribute to growth. The net export growth for the first three quarters has been negative, in any case.”
During the fiscal FY 2020-21, the country can grow in excess of 5.2 per cent, only if the annual private final consumption growth recovers to 5 per cent (from estimated 4.6 per cent last fiscal) but that does not seem to be possible. Government consumption can grow at 11 per cent (same as the last year) and may partly compensate for lower private consumption growth. Industry to remain cautious, given the cash flows and banking system is likely to be stressed.
Sood says, “As for the US, the growth rate will depend on the level of stimulus. My assessment is that the US growth is likely to be not more than 1.5 per cent, which is what the Moody’s are estimating. It may even be lower, if the fiscal package supporting private consumption is not large enough, as we have seen the jobless claims spike to 3.28 million in one week in March.”
The growth rate in export-dependent economies could fall significantly, partly due to lockdown in global trade and the collapse of oil and other commodity prices. And if the US, China, Western Europe and Japan’s private consumption is not supported through large fiscal package, the growth in export-dependent emerging markets will fall drastically. Cutting interest rates or providing liquidity is not likely to drive consumption growth.
According to the financial services company Anand Rathi, barring a large fiscal stimulus, India’s GDP growth in FY21 would be around 3 per cent. Further downside can be expected if the lockdown extends beyond April 14. Industry would be worst hit, especially construction and manufacturing.
The RBI however has refrained from giving estimates of Q4 FY20 growth let alone guidance for FY21.
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