India’s worst recession is right here: Crisil

economy

New Delhi: India’s fourth recession since Independence, first since liberalization, and perhaps the worst to date is here, according to rating agency Crisil.

CRISIL sees the Indian economy shrinking 5 per cent in fiscal 2021 (on-year), because of the Covid-19 pandemic. The first quarter will suffer a staggering 25 per cent contraction.

About 10 per cent of gross domestic product (GDP) in real terms could be permanently lost. “So going back to the growth rates seen before the pandemic is unlikely in the next three fiscals”, Crisil said.

Crisil has revised its earlier forecast downwards. “Earlier, on April 28, we had slashed our prediction to 1.8 per cent growth from 3.5 per cent growth. Things have only gone downhill since”, it said.

While we expect non-agricultural GDP to contract 6 per cent, agriculture could cushion the blow by growing at 2.5 per cent.

In the past 69 years, India has seen a recession only thrice as per available data in fiscals 1958, 1966 and 1980. The reason was the same each time a monsoon shock that hit agriculture, then a sizeable part of the economy.

“The recession staring at us today is different,” it added. For one, agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. Two, the pandemic-induced lockdowns have affected most non-agriculture sectors. And three, the global disruption has upended whatever opportunities India had on the exports front.

Economic conditions have slid precipitously since the April-end forecast of 1.8 per cent GDP growth for fiscal 2021 (baseline), Crisil said.

On the lockdown extension, it said that the government has extended the lockdown four times to deal with the rising number of cases, curtailing economic activity severely (lockdown 4.0 is ending on May 31).

The first quarter of this fiscal will be the worst affected. June is unlikely to see major relaxations as the Covid-19 affliction curve is yet to flatten in India.

“Not only will the first quarter be a washout for the non-agricultural economy, services such as education, and travel and tourism among others, could continue to see a big hit in the quarters to come. Jobs and incomes will see extended losses as these sectors are large employers,” Crisil said.

Crisil also foresees economic activity in states with high Covid-19 cases to suffer prolonged disruption as restrictions could continue longer.

 

JP Morgan forecasts ‘strong rebound’ in Indian markets

New York: Global investment bank JP Morgan is forecasting a “very strong rebound” in Indian markets for the second half of the year while it remains “worried” about what it describes as deterioration in the country’s public finances, social disruption and the limits of public financing in the long slog back from the coronavirus crisis.

“India is going to be going through a very difficult first half of the year. We have GDP down in the second quarter, 35 per cent annualized pace but we have a very strong rebound in the second half of the year, but one that still doesn’t get you back to where you were,” Bruce Kasman, chief economist at JP Morgan told IANS.

Kasman leads a team of thirty economists worldwide who set the bank’s economic and policy views.

The economic wounds will be “deeper than anything we’ve seen since World War Two”, Kasman said. “At the same time, it’s going to be very short lived.”

Kasman thinks the Reserve Bank of India is “almost done but not completely done” with the easing of its key interest rate.

“We have a bottom in the policy rate forecast, 3.75 (per cent) very close to where we are now, Kasman said.

Law to ban Chinese firms listing on US exchanges

Washington: The US Senate has passed a legislation that could ban Chinese companies from listing shares on American exchanges.

The legislation may also ban Chinese companies from raising funds from American investors.

The bill, moved by Louisiana Republican Senator John Kennedy, on Wednesday would require companies to certify that “they are not owned or controlled by a foreign government”.

Shares of Chinese e-commerce giant Alibaba saw its US-listed shares fall more than 2 per cent on the development.

Although the law can be applied to any foreign company, lawmakers have said that the move to strengthen disclosure requirements was aimed at China.

“The Chinese Communist Party cheats, and the Holding Foreign Companies Accountable Act would stop them from cheating on US stock exchanges,” Kennedy, a member of the Senate Banking Committee, said on Twitter.

“We can’t let foreign threats to Americans’ retirement funds take root in our exchanges.”

The passing of the bill is a reflection of the growing anger among US lawmakers towards China and its handling of the coronavirus pandemic.

The White House last week directed the federal retirement savings body to halt investments in Chinese companies which is seen as the beginning of a financial war in addition to the trade war already on between the two countries.

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