After-effects of Lockdown | Confidant Classes for Career Consultancy and Coaching Classes

In the course of fighting against the COVID19 pandemic, our government imposed a stringent nationwide lockdown from March 24 midnight. Our high population density makes us more vulnerable to infection. As we know India’s population density is thrice that of China. In addition to this our fragile state of health infrastructure cannot take the medical overload if the pandemic spins out of control. In addition to this India has limited fiscal space compared with advanced countries, to spend its way out of the hardship.

The second phase (April 15-May 3) appeared less stringent than the first, as there are few attempts to balance the trade-offs and include relaxation clauses this time, particularly for rural areas. But the leeway would depend on the ability of zone/states to control further spread of the virus. Although this is expected to provide much needed relief to agriculture, rural employment schemes, construction and manufacturing, the coming days will pretty much remain a case of crossing the river by feeling the stones. Currently, our country is facing the third phase of the blockade, that is to say from May 4 to 17. The aftermath of the last 40 days of closure was published one by one in terms of state and central government decisions, while headlines from the last two days shifted to increased excise duties on gasoline and fuel. diesel, open liquor stores and raise taxes on them. People seem to be committing to talking about the economy of the air rather than escaping the threat of the Corona virus.

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For the economy, foreclosure has already had serious consequences. The impact will vary by sector, but services, which account for more than 55% of India’s gross domestic product (GDP), have been particularly affected. We also cannot escape the global recession, with a sharp contraction in the advanced countries. These developments will overshadow the gains from the sharp drop in crude oil prices and monetary and fiscal stimuli at the global and national levels.

But the more we depend on foreclosure measures, the more it will be necessary to buffer the economy through fiscal stimulus. And this may be limited by a limited budget margin. Furthermore, the large, unorganized workforce may have no choice but to return to work as soon as possible, as the government may not have the fiscal means to support them all. beyond one point India has extended the initial blockade by 21 days for another 19 days until May 3.

The pandemic that would push the world economy into recession is now strong and clear, with many global multilateral agencies lowering expectations for global growth. Financial markets also anticipate weaker growth. India, which for the most part has avoided major damage from all sorts of major global crises in the past, also appears to be resisting the latest wave of the pandemic as it reports far fewer infections than the major emerging economies. The truth, of course, will only be known in retrospect. But it is true that the Indian economy is not completely isolated from the global economic shock. The effects of our own blocking also begin to be felt. As the pandemic has strained the national health economy, the broader impact of the blockade may bring new challenges in the coming quarters.

What was initially an exogenous coup quickly turned into an internal shock, as the country experienced a 40+ day forced blockade. The closure has already started to affect the economy. Auto sector sales contracted 44% year over year, and exports fell 35% in March 2020. April promises to be worse. In addition, a global recession is now guaranteed with a sharp contraction in the advanced countries. S&P Global has further lowered its growth forecasts. World GDP is now expected to contract 2.4% in 2020 compared to the previous estimate of 0.4% growth. In light of these developments, we have revised our growth prospects for India to 1.8% compared to 3.5% for fiscal year 2021.Our forecast is premised on:

A normal monsoon, Indian Meteorological Department (IMD) expects the southwest monsoon in the range of 96-104% of the long-period average, considered the normal range. Yet, there could be some disruptions during the sowing activity because of labour shortage A sharp fall in oil prices cushioning the economy, while benefiting a few sectors. The effect of the pandemic subsiding materially, if not wearing out, in the April-June quarter.

Revised outlook on key macros
Macro variable	FY19	FY20	FY21 (forecasted)	Rationale for outlook
GDP (%, y-o-y)	6.1%	5.0%*	1.8%	A first blow from the external front quickly turned into an internal shock, as the country faltered under forced closure. The impact of internal spread and forced closure for more than a month is now dominant.
CPI inflation (%, y-o-y)	3.4	4.8	4.4	Inflation should soften, for three reasons: the abnormal surge in food inflation in fiscal 2019 has started to correct,core inflation will remain moderate with slowing growth; andthe sharp drop in crude oil prices will keep fuel inflation soft
10-year G-sec yield (%, March-end)	7.5	6.2	6.5	Despite lower inflation and more flexible policy rates, higher market lending amid shrinking budgets should boost yields
CAD/GDP (%)	2.1	1	0.2	The current account deficit is expected to remain under control due to low commodity and crude oil prices. However, the rupee will be volatile due to the liquidation of foreign portfolio investors and the risk reduction scenario.
Re/US$ (March average)	69.5	74.4	73

Note: * Second advance estimate, **Revised estimate and *** budgeted estimate in the union budget for 2020-21
soure: National Statistical Office(NSO), Budgeted documents and Reserve Bank of India (RBI) , CRISIL

Risks to the outlook could come from three factors:

A further markdown in global growth, in case of uneven health recovery and premature austerity in the face of a large rise in public debt. Continuing restrictions in India – cases are still rising and there are no initial signs of containment yet – in key parts of the economy that drive production/demand, extending the recovery path. Productive capacity of several sectors could get hit, constraining supply A second wave of cases emerging, which could further add to the uncertainty, breaking sentiments further