Following Prime Minister Narendra Modi’s announcement of an extension in the nationwide lockdown till May 3 to contain the spread of the COVID-19 pandemic, global bank Barclays on Tuesday has cut India’s growth forecast for zero for 2020 from its earlier projection of 2.5 percent.
The bank said the economic impact on the economy looks set to be worse that it had earlier anticipated, with the lockdown being extended. Barclays had earlier projected that India’s GDP would grow by 2.5 percent for calendar 2020, based on an analysis of state-level GDP, share of activity and a varied level of disruption across India.
“While India’s COVID-19 outbreak has not officially reached the community transmission stage, we believe the existing restrictions on movement are causing much more economic damage than anticipated. In particular, despite being characterised as essential sectors, the negative impact of the shutdown measures on the mining, agriculture, manufacturing and utility sectors appears higher than we had expected,” the report said.
Combined with the disruption in several service sectors, Barclays said it now estimates that the economic loss for India will be close to $234.4 billion (8.1 percent of GDP). It assumes that India will remain under a partial lockdown at least until the end of May.
Keeping this in mind, Barclays has revised down its GDP growth forecast for India further to zero for CY2020 (from 2.5 percent), and to 0.8 percent for FY20-21 (from 3.5 percent earlier). It also expects a weaker profile for recovery given the deteriorating global backdrop, and rising risk of COVID-19 outbreaks leading to local-level shutdowns. It has also lowered the CY2021 GDP growth forecast to 7.5 percent from 8.0 percent previously.
Barclays estimates continue to assume that the lockdowns end by early June, followed by a modest rebound in activity, reflecting inventory rebuilding across certain sectors. However, if we are still seeing localised COVID-19 outbreaks, which lead to frequent shutdowns, the scope for the economy to recover will continue to decline.
First Published: IST