Ratings agency Crisil has pegged the minimum fiscal support by the government to counter economic losses due to the lockdown at ₹3.5 lakh crore, excluding guarantees that the Centre mayprovide. This includes the ₹1.7 lakh crore stimulus that was announced by the government earlier.
Crisil, which has cut the GDP growth projection to 1.8% for the current financial year, as compared to 3.5% due to the lockdown, said the forecast assumed the effect of the pandemic subsiding materially in the current quarter, besides a normal monsoon, and minimum fiscal support of ₹3.5 lakh crore.
“We see a permanent loss of around 4% of GDP. Fiscal 2022 is likely to see a V-shaped recovery at over 7% real GDP growth. But even assuming growth sustains at this level for the next three years, real GDP will stay below its pre-COVID-19 trend path,” Dharmakirti Joshi, chief economist, Crisil, said. “Risks to our India forecast are tilted to the downside, manifestation of which could take GDP growth to even zero,” he added.
The ratings agency said there was a possibility that parts of the economy would continue to face restrictions beyond May 3, 2020, when the 40-day lockdown would end.
Observing that the lockdown had started hurting already, it cited the example of March when automobile sales contracted 44% year-on-year, even as exports fell 35%, with the worst yet to come.
A research analysis by the rating agency of over 40,000 companies with employee cost of ₹12 lakh crore indicates that about 52% of the employee cost is incurred by companies in sectors that would see a material increase in stress in case of an extended lockdown.
On the banking sector, Crisil expects banking sector NPAs to rise to 11-11.5% by March 2021, from an estimated at 9.6% as of March 2020, with sharply lower recoveries and rising slippages.
“NPAs are expected to swell for non-banking finance companies, too, with microfinance, MSME loans and wholesale/developer funding witnessing the sharpest spike. Asset quality deterioration will, however, remain moderate in housing loans and gold finance with less than 50 bps increase in NPAs,” it added.
