Extended lockout to cause $ 234.4 billion economic loss, says Barclays

MUMBAI: Extending the national blockade until May 3 will inflict an economic loss of $ 234.4 billion and result in stagnant GDP for calendar year 2020, a British brokerage said on Tuesday.

Economic growth will be zero for calendar year 2020 and, viewed from the fiscal year perspective, will increase 0.8 percent in 2021, brokerage Barclays said in a note.

Hours earlier, Prime Minister Narendra Modi extended the three-week blockade that ends Tuesday through May 3, citing the need to stop the growth of coronavirus infections. He indicated the relaxations in unaffected areas starting April 20, but added that this will be based on strict monitoring.

The brokerage had previously said that the three-week blockade would likely cost $ 120 billion, which is now estimated to skyrocket to $ 234.4 billion.

It previously expected India to record 2.5 percent growth in the 2020 calendar, which is now projected to be zero, while growth in fiscal year 21 has been revised down to 0.8 percent from 3.5 percent previously.

As India heads for a longer full shutdown until May 3 to combat the growing number of COVID-19 cases, the economic impact appears to be worse than we previously expected, the brokerage said.

Given that while India is not yet officially calling infections to be in the community transmission stage, existing restrictions on movement are causing far more economic harm than anticipated.

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In particular, the negative impact on essential sectors of the mining, agriculture, manufacturing and public services sectors seems greater than expected, he said.

The brokerage said that upon reaching the numbers, it assumed the locks end in early June, followed by a modest pickup in activity, reflecting inventory rebuilding in certain sectors.

He warned that if COVID-19 outbreaks in a localized area continue to cause frequent shutdowns, the chance of the economy recovering will continue to decrease.