How India Inc. Can Fight Back

What the centre's package to combat corona crisis will do to India's already struggling economy

- Dipak Mondal

Almost 80 per cent of India's Rs 204 lakh crore economy has ground to a halt since the 21-day national lockdown began on March 25. At an average of Rs 55,890 crore per day, India's gross domestic product (GDP) will suffer a setback of at least Rs 9.4 lakh crore. Hence, in FY2021, the Indian economy will in all likelihood shrink rather than grow.

The lockdown, though necessary to break the chain of transmission of coronavirus, will leave destruction across industries such as travel and tourism, aviation, hotels and restaurants, malls, multiplexes, automobiles, among others. And, to a lesser degree, impact sectors such as consumer durables, fuel, electricity and petrochemicals.

But, that is provided the lockdown lasts just the 21 days announced so far. Experience of coronavirus containment in South Korea and Japan suggests it may need up to 60 days to break the cycle of transmission. If so, India may have to brace up for not just one burst of 21-day lockdown but two, possibly three - with or without breaks. If the lockdown extends as far as June, as per some predictions, the economic misery will multiply manifold.

What's making it worse is that India was already in a deep slowdown and economic contraction. It could possibly be a recessionary trend, says CMIE. India Inc. is in a deep contraction, the biggest contraction in real value added in over 20 years, according to CMIE. The contraction in 2019/20 is 12.9 per cent. This is worse than the six per cent contraction during 2008/09 following the global liquidity crisis. All other contractions in the past 20 years for which data is available have been much milder than these, says Mahesh Vyas, Managing Director & CEO, CMIE, in a note.