New Delhi, April 16: With the lockdown now being extended till May 3 and simultaneously government providing some relaxations from April 20, SBI Ecowrap in its latest report estimated that the overall loss for FY21 around Rs 12.1 lakh crore or 6 per cent of nominal gross value added (GVA) taking the nominal GVA growth for entire year to be around 4.2 per cent.

It said nominal GDP for FY21 could be lower/closer to 4.2 per cent, as there is a strong possibility of subsidies outstripping tax collections. However, taking nominal GDP growth at 4.2 per cent, the real GDP growth for FY21 would be around 1.1 per cent.

“Interestingly, we are building in a downward revision in FY20 GDP growth from 5 per cent to 4.1 per cent that results in gain of 1.1 per cent for FY21, which is exactly our estimate for FY21. Thus, if FY20 GDP is not revised down to 4.1 per cent then growth for FY21 could be even lower than 1.1 per cent. Q4FY20 GDP could now be at 1.1 per cent, Q1FY21 GDP could witness a contraction of 6 per cent, or even higher and Q2FY20 could witness no growth,” the report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India stated.

The lockdown is going to have a significant impact on the macro-economic parameters.

First, as per the PLFS report 2017-18, there are 37.3 crore workers engaged as self-employed, regular and casual workers, with share of self employed at 52 per cent, casual worker at 25 per cent and the rest engaged as regular wage earners and others.

“We estimate the income loss per day of these 37.3 crore workers due to lockdown is around Rs 10,000 crore, which translates into a loss of Rs 4.05 lakh crore for the entire lockdown period. For causal labourers, this income loss it at least Rs 1 lakh crore. Thus any fiscal package should at least strive to more than make up for this Rs 4 lakh crore income loss,” the report stated.

It further said: “Second, as our GDP forecasts change, fiscal estimates will also change accordingly. Net tax revenue will have a shortfall of at least around Rs 4.12 lakh crores, and revenue shortfall for states will be Rs 1.32 lakh crore. The revised fiscal deficit would be at 5.7 per cent of GDP and after taking into account only the current EBR the deficit rises to 6.6 per cent of GDP. The fiscal deficit of the states will rise to 3.5 per cent of GDP from the budgeted 2 per cent in FY21. We estimate that the EBR number will rise significantly as Government will try to mobilise resources more through unconventional means like COVID Bonds, monetisation of deficit and others. The consolidated fiscal deficit might rise to 10 per cent of GDP on an unchanged EBR. A 4 per cent slippage in nominal GDP that we are factoring in is tantamount to Rs 8 lakh crore of fiscal supportand this should be recommended benchmark.”

Third, SBI Ecowrap report expects India’s nominal merchandise exports to decline by up to 16 per cent in FY21. This translates into an output loss of $50 billion (Rs 1.86 lakh crore in rupee terms). Looking at the granular data items like gems and jewellery and apparel which are India’s major exports to markets impacted by COVID are more discretionary in nature and hence there could be major dip in demand, the report stated.