Economists See India GDP Growth Plunge On Coronavirus Impact

India’s 21-day lockdown could pull down growth by 2-3 percentage points, according to early estimates from economists.

A deserted view of a market in Jodhpur in Rajasthan, amid the coronavirus pandemic outbreak in India. (Photo: PTI)
A deserted view of a market in Jodhpur in Rajasthan, amid the coronavirus pandemic outbreak in India. (Photo: PTI)

The Indian government’s decision to put the country under lockdown and the extended impact of coronavirus on normal functioning of the economy is expected to pull down the country’s GDP growth sharply.

On Tuesday, Prime Minister Narendra Modi announced that lockdowns across many states would be followed with countrywide restrictions. This will result in a sudden stop across most businesses and impact non-government GDP growth, economists forecast. The impact would be spread over the fourth quarter of FY20 and the first quarter of FY21, with some residual impact seen over the course of next financial year as businesses ramp back up again.

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SBI Economic Research

SBI Economic Research forecasts a fall in FY21 real GDP growth to 2.6 percent compared to the government’s advance estimate of 5 percent in FY20

“We peg our FY21 GDP estimate at 2.6 percent, with a clear downward bias, with Q1 FY21 GDP numbers witnessing a contraction. FY20 GDP estimates could also see a downward revision from 5 percent to 4.5 percent with Q4 GDP growth at 2.5 percent,” wrote Soumya Kanti Ghosh, chief economist at State Bank of India in a note.

According to Ghosh, the total cost of the lockdown could be at least Rs 8.03 lakh crore in nominal terms. This would include an output loss of at least 4 percent of GDP, an income loss of Rs 1.77 lakh crores and a loss in capital income of Rs 1.69 lakh crores.

“The income loss is maximum in Agriculture, Transport, Hotels, Trade and Education and these sectors will have job losses. However, the economy could recover potentially faster if a stimulus programme is in place quickly,” Ghosh said.


CRISIL has reduced its FY21 real GDP growth forecast to 3.5 percent from an estimated 5.2 percent earlier.

“This assumes two things: a normal monsoon, and the effect of the pandemic subsiding materially, if not wearing out, in the April-June quarter. The slump in growth will be concentrated in the first half of next fiscal, while the second half should see a mild recovery,” said DK Joshi, chief economist at CRISIL.

According to Joshi, the impact of social distancing and decline in discretionary spending will aggravate the downturn in the April-June quarter, and the sharp slowdown in key trading-partner economies will slam exports.

“Services, which now account for 41 percent of total exports, have been resilient so far. But a recession in the advanced economies would dampen prospects for IT-ITES, tourism and bring down services exports growth,” Joshi said.


Rahul Bajoria, Chief India Economist at Barclays, is factoring in four full weeks of a complete shutdown, followed by another eight weeks of partial shutdowns across the country until the end of May.

Barclays estimates that the cumulative shutdown costs will be around $120 billion or 4 percent of GDP. Of the $120 billion, the new shutdown assumptions account for roughly $90 billion of additional impact.

“This would roughly translate to around a 2 percentage point of a loss in output, and as a result, we are shaving down our calendar 2020 GDP forecast from 4.5 percent to 2.5 percent and FY21 forecast to 3.5 percent (from 5.2 percent earlier),” Bajoria wrote.

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Nomura estimates that the three-week lockdown will lead to a shutdown of nearly 75 percent of the country. This will result in a direct output loss of nearly 4.5 percent.

“Additionally, there will be indirect effects such as the persistence of public fear factor (even after the lockdown ends), a high risk that the livelihoods of the predominantly unorganised workforce will be hit and a sharp increase in corporate and banking sector stress, which are likely to further weigh on growth is beyond Q2,” wrote Sonal Varma, chief India economist at Nomura Global Market Research.