India's Q1GDP FY21 Loss Could Exceed 40%

GDP growth in June quarter of current fiscal could see a fall of more than 40%, according to a latest update from the SBI research. When India had first imposed a lockdown, the bank expected GDP at 2.6% and since then it has been progressively reduced to a negative 4.7%, with nominal GDP witnessing a contraction. However, given that the States are now taking a staggered approach in terms of activities in red, green and orange zones, a bottom up approach estimation to growth could be more appropriate than an earlier top down approach.

Subsequently SBI estimated the district-wise, zone wise loss in GSDP for each state and found that total GSDP loss due to COVID-19 for states stands at Rs 30.3 lakh crore, which is 13.5% of total GSDP. The loss is maximum (around 50%) in Red Zones and where almost all the big districts of India are located. The combined loss of Orange + Red zone is around 90% of total loss. The loss in Green zone is the least as 80% of population in this zone is located in rural areas which is almost open for all activities.

The latest research from the bank indicates that Q4FY20 GDP numbers could be below 1.5%. The bank estimates it at 1.2%, with FY20 GDP numbers at 4.2%. State-wise analysis indicates that top 10 states accounted for 75% of total GDP loss with Maharashtra contributing 15.6% of total loss, followed by Tamil Nadu (9.4%) and Gujarat (8.6%). These three states also have the largest number of confirmed COVID-19 cases in India. The Q1GDP FY21 loss will be humongous and could even exceed 40%. However, Q2GDP numbers could witness a smart recovery and clock 7.1. Q3 and Q4 growth numbers could also look much better, with an average of 6%, but the Q2 bump could come down with the immediate bust in pent up demand in Q2 subsiding subsequently.

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