Covid to remove Rs 6 lakh crore from GDP FY21: Former Lieutenant Governor RBI R Gandhi

MUMBAI: The Covid-19 and pandemic business slowdown are expected to eliminate Rs 6 lakh crore from the country's gross domestic product in FY20-21. The stimulus provided by the government so far, including the Garib Kalyan scheme, is roughly equal to the damage of Rs 2.5 lakh crore to the economy in the previous fiscal year due to disruptions in March 2020, according to the former RBI lieutenant governor.

“The economy was expected to grow in nominal terms to Rs 185 lakh crore in fiscal year 20. The impact in the previous fiscal year was limited to a fortnight of slowdown and a fortnight of closing. This would have resulted in a loss of Rs 2.5 lakh crore, based on the assumption that agriculture was not affected, ”said Gandhi.

“In the current fiscal we have lost April and in May we are likely to see a partial closure. For seven weeks, the loss of income should be around Rs 6 lakh crore of added value, ”said Gandhi. The first indicator of normality would be the movement of people by road, rail and air, he said.

According to Gandhi, as the RBI's three-month moratorium comes to an end and the accrued interest matures for borrowers, they could seek a one-time restructuring. This could be similar to the exercise allowed during the time of former Governor Bimal Jalan in 1998, when lenders were allowed to extend a 'single, non-discretionary and non-discriminatory agreement in which the loan will not be classified as a defaulting asset, he said.

In addition to this, there is also an expectation that there will be a government small business credit guarantee scheme. Gandhi added that SMEs needed a more radical step: providing government venture capital perhaps with the assurance that it would be repaid at better times when the former central banker spoke at an online event in a post-Covid manifesto for economic revival organized by electronic payment and services.

According to him, the main problem for companies is not a lack of profits, but a lack of liquidity, since they have not received payments during the closing. “There are certain segments for which the rebound in demand would be extremely delayed. This would include goods and services that are part of discretionary spending, he said.

“There will be a great demand for financing, be it for businesses or individuals. Everyone will ask for working capital limits, ”said Gandhi. He said that self-employed workers would be seriously affected and would turn to credit cards for financing. I hope the growth of credit cards is robust and strong, he said.

Furthermore, when it comes to micro and small and medium-sized enterprises, banks would be reluctant to lend despite the momentum of the government and RBI, and are likely to turn to shadow banks for alternative lines of credit. Fintech lenders, who have been using technology for credit assessment, are also likely to be looking for consumer spending.