Rupakumar Pradhan, CFPCM, CWM®

Personal Financial Advisor

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IMF- World Economic Outlook and Indian GDP

IMF- World Economic Outlook and Indian GDP

IMF- World Economic Outlook and Indian GDP
May 01
19:39 2020

Growth in the Indian economy could fall to levels not seen for decades as key sectors see a sharp decline in business during Covid-19 lockdown. The pandemic and consequent lockdown have hit various sectors, including MSME, hospitality, civil aviation, agriculture and allied sector.

When there is complete lockdown in a country like India, economy and its growth suffer drastically. It wouldn’t be a surprise if our GDP growth, already low, can go down further in future.

Unprecedented losses

First, let us get an understanding of the economic impact of the Covid-19 crisis. The Asian Development Bank has estimated that the global economic cost of the virus is a whopping $2 to $4 trillion.

Going by the damages estimated by some legal / research firms, the figure goes up to an unthinkable $6.5 trillion.

Come to Indian economy.

As per Acuite Ratings & Research Ltd estimation earlier this month, the lockdown will cost the Indian economy almost USD 4.64 billion (over Rs 35,000 crore) every day and the entire 21-day lockdown will result in a GDP loss of almost USD 98 billion (about Rs 7.5 lakh crore).

Today, the lockdown extended for two additional weeks (Till May 17) with a list of activities prohibited across country. It’s another 15 days.

Remember, we face extremely challenging times. The outbreak of Covid-19 is disrupting people’s lives and interrupting business and other economic activities in India and around the world,

Let us discuss about Coronavirus impact on Indian GDP.

What would be the Lockdown impact on our GDP?

A host of global agencies have cut India’s economic growth estimate for FY21 on concerns about the fallout of Coronavirus outbreak.

World Bank said India’s economy is expected to grow 1.5 per cent to 2.8 per cent in 2020-21 fiscal which started on April 1. This will be the slowest growth rate recorded since the economic reforms of 1991.

Asian Development Bank (ADB) sees India’s economic growth slipping to 4% in FY21, while S&P Global Ratings has further slashed its GDP growth forecast for the country to 3.5 per cent from a previous downgrade of 5.2 per cent.

Fitch Ratings puts its estimate for India growth at 2 per cent while India Ratings & Research has revised its FY21 forecast to 3.6 per cent from 5.5 per cent earlier.

Moody’s Investors Service has slashed its estimate of India’s GDP growth during the 2020 calendar year to 2.5 per cent, from an earlier estimate of 5.3 per cent and said the coronavirus pandemic will cause unprecedented shock to the global economy.

Acuite Ratings believes there is a risk of a contraction of April-June (2020-21 fiscal) GDP to the extent of 5-6 per cent, with Q2 (July-September) also likely to post modest growth in a best-case scenario.

Recently IMF published – “World Economic Outlook, April 2020: The Great Lockdown”

Let us get an understanding the IMF report and see the table to comprehend World GDP and other country’s GDP projections.

International Monetary Fund (IMF) on 14th April cut India’s GDP (Gross Domestic Products) growth rate to 1.9 per cent in fiscal year 2020-21 starting April 1.

IMF Says, The COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protection measures are severely impacting economic activity.

As a result of the pandemic, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis. In a baseline scenario–which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound—the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support.

For India, the report has projected GDP growth rate at 1.9 per cent for 2020-21, which is 3.9 per cent lower than the January outlook and 5.1 per cent lower than the projection made in October. However, GDP growth rate is estimated to jump to 7.4 per cent during 2021-22. This is almost one percentage point higher than the January estimate and unchanged from last October’s projection.

The IMF sees USA’s FY20 growth at -5.6% and United Kingdom’s FY20 growth -6.5%. China is seen growing 1.2% in 2020 and 9.2% in 2021. India’s growth is seen recovering sharply to 7.4% in the next fiscal year

Press Briefing: World Economic Outlook (WEO) -Video

Get set, go

We must focus on re-booting the Indian economy. Over the past few years there has been a decline in India’s GDP growth rates and the problem has been further exacerbated by the Coronavirus pandemic.

In the upcoming days, both the central government and RBI is expected to come out with various similar relief measures. This would improve the suffering of the economy activities and also GDP.

It would take at least 4-5 months to restore all economic activities and the industry supply chain completely in the domestic market.

What you need to do is simply stay the course. Don’t panic sell and make paper losses (notional losses) into permanent ones. At any cost, don’t stop your SIPs. I humbly request to avoid looking at your portfolio for some more time to come. Please remember, your portfolio doesn’t care if you look at it every day.

Your emotion or behavior would decide your investing future.

Plan Well To Live Well!

“Economy has frequently nothing whatever to do with the amount of money being spent, but with the wisdom used in spending it.” ~Henry Ford

Source- International Monetary Fund

I am a CERTIFIED FINANCIAL PLANNERCM, CHARTERED WEALTH MANAGER®. For the moment, I have shared my experience growing up with you because it had a tremendous impact on how I do what I do.

If you have a question about your own financial situation please connect with me.  I’d be delighted to try to be of service.

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About Author

Rupakumar

Rupakumar

Mr. Pradhan has over 22 years of experience in financial services industry. He was previously working with leading Life Insurance Companies, Broking Firms, Distribution Company, Financial Planning Company and Health Insurance Company. He has cleared several NCFM modules & is also AMFI Certified. His expertise is in Comprehensive Financial Planning, Technical Analysis, Portfolio Management, Investment Advisory, Wealth Management & Business Development.

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