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COVID-19 impact: 'Economy may contract', FM Sitharaman says during GST meet

New Delhi: Union Finance Minister Nirmala Sitharaman chairs the 41st GST Council meeting via video conferencing, in New Delhi, Thursday, Aug 27, 2020. MoS for Finance Anurag Thakur is also seen. (PTI Photo) (PTI27-08-2020_000035B) (PTI)Premium
New Delhi: Union Finance Minister Nirmala Sitharaman chairs the 41st GST Council meeting via video conferencing, in New Delhi, Thursday, Aug 27, 2020. MoS for Finance Anurag Thakur is also seen. (PTI Photo) (PTI27-08-2020_000035B) (PTI)

  • RBI earlier had said that the contraction in economic activity was likely to continue in the second quarter of the current fiscal
  • India’s GDP could contract between 3% and 9% in the current fiscal year, McKinsey Global Institute said in a report

The coronaviurs pandemic severely affected economy in the last few months. The Goods and Services Tax (GST) revenue collection was impacted by nationwide lockdown. The shortfall in the tax collection was estimated at 2.35 lakh crore, for fiscal 2021, said revenue secretary. "This year we are facing an extraordinary situation that even below 10% approximate estimation you are facing an 'Act of God' which might even result in a contraction of the economy...," Finance minister Nirmala Sitharaman said while briefing media on 41st GST Council meeting.

The centre released over 1.65 lakh crore as GST compensation to states for fiscal 2020, including 13,806 crore for March, Sitharaman said.

The central government imposed a nationwide lockdown on March 25 to prevent the coronavirus spread in the country. Over the last few months the lockdowns were gradually lifted in a phased manner to restart the economic activities.

Earlier this week, the Reserve Bank had said that the contraction in economic activity was likely to continue in the second quarter of the current fiscal as upticks witnessed in May and June appears to have lost strength following reimposition of lockdowns to contain the coronavirus pandemic.

On estimated inflation and GDP numbers, Reserve Bank of India governor Shaktikanta Das said, "So it is very difficult to give inflation or GDP numbers. In an uncertain situation like this, the RBI does not have the luxury of giving any numbers and then changing them two months later. We will start giving numbers when we have some amount of clarity."

Das said the government's response to absorb the negative economic impact of COVID-19 has been prudent and well-calibrated.

The National Statistical Office is scheduled to release its estimates of gross domestic product (GDP) for the first quarter of this fiscal on August 31.

The growth projections for current fiscal by various agencies show a sharp contraction of the Indian economy ranging from (-)3.2% to (-)9.5%.

India’s GDP could contract between 3% and 9% in the current fiscal year depending on the effectiveness of the steps taken to contain coronavirus infections and the government’s economic policy responses, McKinsey Global Institute said in a report.

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