ICRA Lowers GDP Forecast On Account Of Lockdown, Curfew

Lockdown across Maharashtra and other states has pushed rating agency ICRA to reduce its FY 2022 GDP to 10.2%.

"Towards the end of the last fiscal year on March 24th ICRA had projected growth in GDP for FY22 to be between 11-11.2% based on GVA growth of 10.2%.

The spread of the virus in Maharashtra had led to the announcement of a lockdown by the state government which began in a less stringent manner from the first week of April. Consequently, on factoring the potential loss of economic output due to the restrictions in Maharashtra on 5th April we lowered our GDP forecast for FY22 to 10.7-10.9%. But the lockdown has been made more obtrusive to business activity by the 20th of April, with more stringency expected for the forthcoming fortnight. Further, the spread of the virus to other states has caused similar actions by governments which have ranged from night curfews and weekend lockdowns to full lockdowns," ICRA has said in a report.

The main assumptions ICRA has taken into consideration are:

• Centre does not announce a lockdown at the national level.

• Infection incidence will rise in May from new regions.

• Other states besides the current ones will also announce lockdowns.

• Business activity will get constricted with these measures.

• The distinction between essential and non-essential goods will further push back the latter.

• Consumption as a whole will fall and all of this decline will not be compensated for during the course of the year unlike last year. Also, the loss of output in the various segments of the services sector cannot be recouped.

• The lockdown impact has been worked out for a 'two-month effect' meaning thereby, these lockdowns will be eased from June onwards. This may not really be so in which case the impact would be sharper.