British brokerage Barclays on Tuesday said India’s decision to extend the nationwide lockdown to combat the coronavirus pandemic till May 3 will inflict an economic loss of $234.4 billion (approximately Rs 18 lakh crore) or 8.1% of GDP.

It also cut its growth forecast for the calendar year 2020 to 0% from the earlier projection of 2.5%, PTI reported. For the financial year 2020-’21, Barclays revised the growth to 0.8% from the earlier projection of 3.5%.

Prime Minister Narendra Modi on Tuesday told Indians that they will need to stay at home until May 3. Extending the lockdown to check the spread of the coronavirus that began on March 25 with four hours’ notice, Modi called Indians to be even more vigilant about staying indoors until April 20, after which areas that do not have cases may be allowed some leeway. India has so far reported 10,363 cases of Covid-19, including 339 deaths, 1,035 recoveries and one migration, according to the Union Ministry of Health and Family Welfare.

“While India’s Covid-19 outbreak has not officially reached the community transmission stage, we believe the existing restrictions on movement are causing much more economic damage than anticipated,” the brokerage said in a report, according to Mint. “Despite being characterised as essential sectors, the negative impact of the shutdown measures on the mining, agriculture, manufacturing and utility sectors appears higher than we had expected.”

The investment bank had earlier estimated that India will face a loss of $120 billion for the same period. It added that while calculating the new numbers, it had assumed that the lockdown will end by May.

Barclays projected major economic losses for large industrial states such as Maharashtra, Delhi, Tamil Nadu and Punjab. “This is a direct reflection of the high Covid case counts in these states, and lockdowns that are likely to persist across several sectors and for longer time periods than in the rest of the country,” it said.

“Our trajectory of a slower recovery factors in the only modest fiscal stimulus unveiled by the government up to now,” Barclays added. “We think this is unlikely to offset the negative impact on ‘animal spirits’ caused by relative inactivity for a long period. Major policy interventions, if taken, could, however, change the outcome and bring about a faster upswing after the lockdown opens. That said, the slowdown in early Q2 will be driven entirely by the shutdown and is unlikely to be impacted by policy support.”

Last month, Reserve Bank of India Governor Shaktikanta Das has said the central bank will not shy away from using “any instrument” necessary to revive growth and preserve financial stability to mitigate the adverse economic impact of the coronavirus pandemic.

The Centre imposed a 21-day nationwide lockdown from March 25 to prevent the spread of the virus. On March 26, the government announced a relief package of Rs 1.7 lakh crore to help the poor tide over the impact of the lockdown. The benefits – through cash and food – were targeted at farmers, migrant workers, the poor, women and the disabled, among others.

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