Coronavirus Economic Pain To Stay Long After Lockdown; What RBI, Govt Must Do To Save Livelihoods

Loss of GDP may continue even after lockdown as lifting of restrictions shall be gradual.

The war against Covid-19 pandemic is not yet over. Like many other countries, India too is fighting the war relentlessly. India’s handling of the Covid-19 crisis so far has been reasonably successful due to early lockdown and strict implementation. The corona-positive cases in India have been increasing linearly rather than exponentially. The ratio of recovery to the positive cases has been rising steadily. While the nation-wide lockdown is under progress, hotspots have been identified and containment zones demarcated, giving an opportunity for the rest of the country to resume work and restore economic activities, wherever possible. The strategy has been calibrated lifting of restrictions since April 20, 2020, which may gather momentum after the lockdown expires on May 3, 2020. Nevertheless, there is no room for complacency, at least in red zones where the pandemic is still spreading rapidly.

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What about livelihood? India has already suffered huge loss of income, employment and GDP due to nation-wide lockdown for 40 days since March 27, 2020. The IMF’s world economic outlook has predicted India’s real GDP growth at 1.9% in FY21, which has become doubtful. Loss of nominal GDP on 100% basis for 40 days is likely to be over ₹24 trillion, and at least ₹12 trillion on 50% basis from ₹225 trillion projected in FY21 budget. Similarly, the loss of India’s real GDP may be over ₹17 trillion on 100% basis and ₹8.5 trillion on 50% basis from the projected level of ₹156 trillion. Loss of GDP may continue even after lockdown as lifting of restrictions shall be gradual. Under an optimistic scenario i.e., 50% GDP loss during the lockdown, India’s nominal GDP growth in FY21 may be hardly 4% – equal to average CPI inflation and hence no real GDP growth.

Source: Financial Express

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