India is eagerly awaiting growth data for the January-March quarter as it will give an indication of the extent of the economic loss caused by the Covid-19 pandemic.
Global rating agencies and other microeconomic observers have forecasted a growth contraction in the range of 0% to 5% in the current financial year (April 2020 – March 2021).
Even though Indian Prime Minister Narendra Modi announced a nation-wide lockdown on 25 March, economic activities slowed down almost a week before that.
In the first quarter (April-June) of the financial year 2019-20, India saw GDP growth of 5.6 percent. The next two subsequent quarters of July-September and October-December witnessed GDP growth of 5.1 percent and 4.7 percent.
Joseph Thomas, Head (Research), Emkay Wealth Management, said, “The lockdown actually started in the last week of March, and therefore, the GDP number may not reflect the actual ground reality currently prevailing and the full impact of the lockdown on the main sectors of the economy. The rate of growth for the last quarter may still be in the lower single digit, while the numbers for the current quarter may reflect the actual distress in the economy.”
“The pandemic dealt a severe body blow to the economy consequent to the national lockdown, and the widespread wage cuts and job losses both in the formal sector and the unorganized sector,” Joseph added, pointing to the fact that more distress may be seen in the numbers for April onwards.
Professor Bhanumurthy of the National Institute of Public Finance and Policy puts it bluntly. “India is undoubtedly in recession. There is no doubt about it.”
India rolled out a $266 billion economic stimulus package recently that failed to make much of an impression on the markets. India's banking regulator, too, has deployed a number of liquidity measures since March and reduced its benchmark lending rates twice.