The OSE sets the growth for fiscal year 2011 at 2.6%, says that the government must monetize the deficit
MUMBAI: Internal economists at the State Bank of India (SBI) have set the growth forecast for January-March at 2.5 percent and for 2020-21 at 2.6 percent due to massive disruptions to business and the economy due to COVID -19 locks, which have invested at least 70 percent of the economy.
The nation is in a three-week blackout that ends on April 14, which many believe will have to spread as more and more coronavirus infections are reported across the country.
The pandemic has killed 109 people and infected 4,069 as of Monday in the country, while globally it has killed tens of thousands and infected more than a million, mainly in the United States.
The 21-day blockade will cost the economy at least Rs 8 lakh crore, according to a report by SBI Research, which says that at least 70 percent of the economy is stagnant because of this.
The estimate shows that over a 60-year period, global GDP (gross domestic product) has decreased only once a year in 2009 by 1.7 percent. But many analysts have linked the global contraction by more than 1.9 percent, but some independent estimates suggest a contraction of up to 4 percent in the global economy.
The country's share of world GDP is currently 3.5%.
We estimate another 1.7 percent impact on real GDP due to the 21-day blockade in fiscal year 2011 that results in at least 70 percent of the economy at a standstill.
We establish an estimate of FY21 GDP of 2.6 percent, with a clear downward bias, with Q1 of FY21 GDP numbers witnessing a contraction. GDP estimates for fiscal year 2016 could also see a downward revision from 5 percent to 4.5 percent with fourth-quarter growth of 2.5 percent, SBI Research said in a note, adding that the total cost of the blockade 21 at Rs 8.2 lakh crore in nominal terms and 4 percent production loss on a conservative approach.
But they are quick to add that the economy could recover if a stronger stimulus is offered.
Meanwhile, amid talks that the government announced a second stimulus package to help people, businesses and the economy stand up to overcome massive shocks, the report said the Reserve Bank should monetize the deficit, which is expected to exceed at least 400 bps.
Given the low market appetite for loans, it is imperative that the government use the clause given in the FRBM Act and monetize the deficit with the RBI that subscribes to the main central government debt problems and fill the supply gap and lawsuit in fiscal year 21, according to the report.
In fiscal year 2020, the total indebtedness of the Center and the states stood at Rs 13.5 lakh crore, the Center at Rs 7.1 lakh crore and the states combined Rs 6.4 lakh crore.
Given at least an estimated 4% slip in GDP/Rs 8 lakh crore, we expect the Center and states to be able to borrow conservatively close to Rs 20 lakh crore in fiscal year 21. Therefore, it is an obligation that RBI Monetize the deficit, using the national calamity clause given the stressed market absorptive capacity, he says, adding that this will add up to 2.5-3 percent of GDP and the government must show it separately as an off-balance sheet item. in the budget as a 'COVID bonus'.