Barclays cuts GDP forecast for India to zero for 2020 | Mint
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Business News/ News / India/  Barclays cuts GDP forecast for India to zero for 2020
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Barclays cuts GDP forecast for India to zero for 2020

The investment bank said, combined with the disruption in several service sectors, it now estimates the economic loss at close to $234.4 billion or 8.1% of GDP
  • It sees major economic losses for large industrial states such as Maharashtra, Delhi, Tamil Nadu and Punjab
  • Barclays said once the lockdown is over, the pace of recovery will be contingent on policy support by the governmentPremium
    Barclays said once the lockdown is over, the pace of recovery will be contingent on policy support by the government

    NEW DELHI: As India extended the nationwide lockdown till 3 May to combat the covid-19 outbreak, Barclays cut its growth forecast for the country to 0% for calendar year 2020 from its earlier projection of 2.5%, holding that the economic fallout will be worse than it had earlier estimated.

    “While India’s COVID outbreak has not officially reached the community transmission stage, we believe the existing restrictions on movement are causing much more economic damage than anticipated. Despite being characterised as essential sectors, the negative impact of the shutdown measures on the mining, agriculture, manufacturing and utility sectors appears higher than we had expected," it said in a report.

    The investment bank said, combined with the disruption in several service sectors, the economic loss is estimated to be close to $234.4 billion or 8.1% of GDP, assuming that India will remain under a partial lockdown at least until the end of May. “This is much higher than the $120 billion we had estimated earlier for roughly the same time period previously," it said.

    Barclays said across the country, it sees major economic losses for large industrial states such as Maharashtra, Delhi, Tamil Nadu and Punjab. “This is a direct reflection of the high covid case counts in these states, and lockdowns that are likely to persist across several sectors and for longer time periods than in the rest of the country."

    Even for states that are likely to experience a faster recovery cycle, such as Kerala, Karnataka, and Haryana, while their economic losses will likely be limited, a precautionary increase in savings and reduction in discretionary consumption, especially on travel and recreational services, will weigh on growth rates longer, Barclays said. “This drives the downward revision in our growth recovery outlook to show a shallower pick-up in Q3."

    Barclays said once the lockdown is over, the pace of recovery will be contingent on policy support by the government. “Our trajectory of a slower recovery factors in the only modest fiscal stimulus unveiled by the government up to now. We think this is unlikely to offset the negative impact on ‘animal spirits’ caused by relative inactivity for a long period. Major policy interventions, if taken, could, however, change the outcome and bring about a faster upswing after the lockdown opens. That said, the slowdown in early Q2 will be driven entirely by the shutdown and is unlikely to be impacted by policy support," it added.

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    Published: 14 Apr 2020, 12:43 PM IST
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