As there have been supply disruptions due to the lockdown, NCAER provided four scenarios where the economy may witness flat GDP, or GDP contraction of 2, 5 and 10 per cent.
The National Council of Applied Economic Research (NCAER) on Thursday estimated that the economy would have contracted 12.4 per cent in the current financial year (FY21) had there been no support measures from the government and the Reserve Bank of India (RBI).
Under this scenario, gross value added (GVA) would have contracted 25.7 per cent in the first quarter, 16.7 per cent in the second quarter and 8.1 per cent in the third quarter before growing 0.5 per cent in the fourth quarter of FY21. However, the Council now expects the economy to grow by 1.3 per cent in FY21, given that there is no supply-side disruption.
But given that there have been supply disruptions due to the nationwide lockdown, NCAER has provided four scenarios where the economy may witness flat GDP growth, or GDP contraction of two, five and 10 per cent.
“The results suggest that while a decline in GDP could be significantly contained by these measures (by the government and RBI), the actual outcomes will depend on the strength of the supply response and the extent to which the lockdown-related supply disruptions are overcome,” NCAER said.
These four scenarios suggest that the inflation rate would rise moderately to 6-8 per cent and the current account deficit would remain below 3 percent of GDP. The combined fiscal deficit of the Centre and the states would be contained below 8 per cent of GDP, it said.
The country went into a lockdown in March-end to stem the spread of the Covid-19 pandemic, bringing all economic activity to a grinding halt.
On Wednesday, The International Monetary Fund (IMF) warned that the Indian economy
faces an even deeper downturn than what it had projected in April as the country grapples with the Covid-19 pandemic. IMF has projected a sharp contraction of 4.5 per cent in FY 21, a steep drop from its April forecast of a 1.9 per cent expansion. The latest projection is the lowest in several decades.
In fact, India faced the sharpest cut in the outlook — a 6.4 percentage point revision due to a more severe fallout of the pandemic than anticipated.
In comparison, emerging markets (EMs) and developing countries saw a 2 percentage point reduction in outlook, while the global outlook was cut by 1.9 percentage points.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.