India’s fourth recession since Independence, first since liberalization, and perhaps the worst to date is here, according to rating agency, Crisil.
About 10 per cent of gross domestic product (GDP) in real terms could be permanently lost. “So going back to the growth rates seen before the pandemic is unlikely in the next three fiscals”, Crisil said.
While we expect non-agricultural GDP to contract 6 per cent, agriculture could cushion the blow by growing at 2.5 per cent.
In the past 69 years, India has seen a recession only thrice as per available data in fiscals 1958, 1966 and 1980. The reason was the same each time a monsoon shock that hit agriculture, then a sizeable part of the economy.
“The recession staring at us today is different,” it added. For one, agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. Two, the pandemic-induced lock downs have affected most non-agriculture sectors. And three, the global disruption has upended whatever opportunities India had on the exports front.
Economic conditions have slid precipitously since the April-end forecast of 1.8 per cent GDP growth for fiscal 2021 (baseline), Crisil said.
On the lockdown extension, it said that the government has extended the lockdown four times to deal with the rising number of cases, curtailing economic activity severely (lockdown 4.0 is ending on May 31).
The first quarter of this fiscal will be the worst affected. June is unlikely to see major relaxations as the Covid-19 affliction curve is yet to flatten in India.
“Not only will the first quarter be a washout for the non-agricultural economy, services such as education, and travel and tourism among others, could continue to see a big hit in the quarters to come. Jobs and incomes will see extended losses as these sectors are large employers,” Crisil said.
CRISIL also foresees economic activity in states with high Covid-19 cases to suffer prolonged disruption as restrictions could continue longer.
