Coronavirus impact: DBS revises India's GDP estimate to 1.5% for FY21

Singapore's banking group DBS on Thursday revised India's GDP estimate to 1.5 per cent for the current fiscal amid the ongoing lockdown due to the coronavirus pandemic, PTI reported.

The development comes a day after American brokerage Goldman Sachs revised its forecast for the country's real GDP growth to 1.6 per cent as against 3.3 per cent it had estimated earlier. Goldman Sachs, like most other research houses, expects a strong economic recovery in the second half of FY21.

"We have revised GDP estimate for FY21 at 1.5 per cent year-on-year vs 4.5 per cent in FY20," DBS Bank India's economist Radhika Rao said in a report. Weakening global growth outlook will also impinge on the country's trajectory. 

The Singaporean lender said it sees the lockdown/ restrictive movements will be eased in phases by end-Q2. It said on average every month contributes to around eight per cent of the full-year output and a month's closure amounts to close to four per cent of output loss.

"If we assume that manufacturing, mining, services except those in the public domain are at nil capacity and lockdown extends, potential output loss rises to 5-6 per cent of GDP," Rao said. The report said that from the demand-side, about 75 per cent of the economy is below trend, hurting consumption and investment activity.

It also said a third of personal final consumption expenditure is discretionary, items like spending on recreation, restaurants, travel etc.

"Movement restrictions are likely to adversely impact consumption and employment prospects of these categories," it said. The report further said The Centre and state borrowings may jump, with deficits likely to be 200-300 basis points higher than the baseline.

A KPMG report had earlier said that India's growth could slip below 3 per cent in the current fiscal if coronavirus proliferates within India, lockdown extended and global economy slips into recession. It said the three major contributors to GDP -- private consumption, investment and external trade -- will all get affected due to the spread of the pandemic.

The KPMG report presented three scenarios to explain the economic effects of COVID--19. In the scenario of quick retraction across globe by April-end to mid-May, the report said "India's growth for 2020-21 may be in the range of 5.3 to 5.7 per cent, though this scenario looks distant at this moment".