COVID19 Impact: Why GDP will go down?

Hello Friends, this article is regarding the impact on GDP due to coronavirus pandemic and how ECORAP has reviewed these circumstances.

COVID19 Impact: GDP growth to be 1.1% in FY21, estimated to come down to 4.1% in FY20- SBI report

There will be a loss of about Rs 12.1 lakh crore or 6 per cent GVA at market value in the financial the year 2020-21.

India's economic growth may fall to 1.1 pc this fiscal due to coronavirus pandemic: SBI ECO RAP report.

The country's GDP (GDP) the growth rate may be limited to 1.1 per cent in the current fiscal year due to the impact of the coronavirus epidemic. It has been said in a research report by the State Bank of India (SBI). Economic growth is projected to decline to 4.1 per cent in FY 2019-20, while many agencies had predicted it to be 5 per cent before the epidemic.

The Coronavirus epidemic has infected more than 2 million people worldwide and caused 1.3 million deaths. To prevent coronavirus infection, the government has extended the period of 'lockdown' till May 3. However, some areas have been given some relief from April 20. Earlier, a 25-day bandh was announced from 25 March.

According to SBI's ECORAP report, extending the lockdown period will result in a loss of Rs 12.1 lakh crore or 6 per cent in gross value addition at the market price. Or there will be a loss of 6 per cent GVA at market price. In this, the GVA growth rate for the whole year is considered to be around 4.2 per cent. "

The subsidy may be more than tax collection

There is a strong possibility that subsidy may go ahead in comparison to tax collection. However, if the market price-based GDP growth rate is assumed to be 4.2 per cent, then real GDP (after adjusting inflation) will be around 1.1 per cent.

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373 million workers lost 10,000 crore daily

The report said that the nationwide bandh will have a wide impact on various macroeconomic parameters. Citing the PLFS (Fixed-Term Labor Force Survey) survey for the year 2017-18, the report said that about 37.3 crore workers are engaged on self-employment, regular and contract. In this, 52 per cent of the self-employed, 25 per cent of the contract workers and the rest are regular workers.

If the entire closed period is looked at, then it is Rs 4.05 lakh crore. Income loss for contract workers is at least one lakh crore rupees. Therefore, any financial package should be kept in mind to at least compensate for the loss of this Rs 4 lakh crore income.”

Revised fiscal deficit to be 5.7% of GDP

The ECORAP report states, "Since our GDP estimates have changed. In such a situation, the fiscal estimate will also change accordingly. Net tax revenue will be reduced by about Rs 4.12 lakh crore and there will be a decrease of Rs 1.32 lakh crore in revenue for the states.

The revised fiscal deficit will be 5.7 per cent of GDP and if only the current EBR (debt requirement for the treasury) is taken, the deficit will increase to 6.6 per cent of GDP. 

The government has projected a fiscal deficit of 3.5 per cent in the current financial year. 

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