Lockdown to cost Indian economy $4.64 bn every day: Acuite Ratings

“While the countrywide shutdown is scheduled to be lifted from April 15, 2020, the risks of prolonged disruption in economic activities exist depending on the intensity of the outbreak,” the credit rating agency said in a statement

By   |  Published: 2nd Apr 2020  9:48 pm
SEVERE IMPACT: Acuite Ratings believes there is a risk of a contraction of April-June quarter GDP to the extent of 5-6 per cent.

New Delhi: The unprecedented nationwide lockdown that shut businesses, suspended flights and stopped all modes of transport will cost the Indian economy almost $4.64 billion every day and the entire 21-day lockdown will result in a GDP loss of almost $98 billion, Acuite Ratings & Research Ltd said on Thursday.

“While the countrywide shutdown is scheduled to be lifted from April 15, 2020, the risks of prolonged disruption in economic activities exist depending on the intensity of the outbreak,” the credit rating agency said in a statement.

The ongoing disruption, it said, will have a significant economic consequence across the world and also in India.

IMF has already forecast a recession for the global economy in 2020.

Acuite Ratings believes there is a risk of a contraction of April-June (2020-21 fiscal) GDP to the extent of 5-6 per cent, with Q2 (July-September) also likely to post modest growth in a best-case scenario.

It expects the overall GDP growth for FY21 (April 2020 to March 2021) to be in the band of 2-3 per cent which takes into account a significant economic revival in the second half of the financial year.

Sankar Chakraborti, CEO, Acuite Ratings & Research, said: “Acuite Ratings estimates that every single day of the nation-wide lockdown will cost the Indian economy almost USD 4.64 billion. Consequently, the 21-day lockdown will result in a loss of GDP of almost $98 billion.”

Stating that the ratings agency employed multiple methods to assess real GDP estimates for Q1 FY21, he said there is a significant risk that it may contract up to an extent of 5-6 per cent as compared to a pre-Covid growth estimate of 5 per cent.

In such a lockdown scenario, the sectors that are most severely impacted are transport, hotel, restaurant, and real estate activities.

“In our opinion, there would be at around 50 per cent GVA (gross value added) loss in these sectors, which account for around 22 per cent in overall GVA, in Q1 of FY21,” it said.

On the other hand, the services that are expected to see enhanced activities during this crisis are communication, broadcasting, and healthcare. But with a 3.5 per cent share, their contribution to the overall GVA is small.

The impact of the lockdown is also fairly severe on industrial activities which is set to witness significant contraction in Q1 except in the pharmaceutical, gas and electricity and medical devices which account for around 5 per cent GVA, it added.

Unlike the services sector, the industry, however, can manage demand to some extent with inventory drawdowns until the resumption of production.


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