Until a few months back, India was talking about double-digit growth; and ways and means to achieve it. Now, we are at a point where there are talks about negative growth as far as India is concerned. As per McKinsey report, if lockdown gets extended because of Coronavirus flares up, one can see India witness negative growth of (-)8 to (-)9 per cent.
McKinsey has taken into consideration three different scenarios while preparing the report which is very interesting. The most extreme scenario is third where it was stated that there will be an economic contraction of around 8 to 10 per cent for the fiscal year 2021. “This could occur if the virus flares up a few times over the rest of the year, necessitating more lockdowns, causing even greater reluctance among migrants to resume work, and ensuring a much slower rate of recovery.”
The report by McKinsey in two scenarios claimed that India will see negative growth. Meanwhile, in another (second) scenario, it is assumed that if the lockdown would continue until mid-May, (which is the case partially). The growth of India would again be negative — (-)2 to (-)3 per cent for the financial year 2020-2021. However, the present state of India is that the country will head for lockdown until May 3, as per the announcement by the Prime Minister, Narendra Modi. He also added that the places where the spread is contained they can opt for a partial lockdown. Even to achieve this negative growth, the consulting firm suggested the Indian government will have to spend more than 5 per cent of GDP or more than Rs 10 lakh crore (exceeding $130 billion).
Yet another scenario documented by the consulting firm suggested that India will continue to grow at 1-2 per cent in the financial year 2020-2021. McKinsey stated, “In this scenario, the lockdown would be relaxed after April 15, 2020 (when the 21-day deadline is due to expire), with appropriate protocols put in place for the movement of goods and people after that. Our economic modelling suggests that even in this scenario of relatively quick rebound, the livelihoods of eight million workers, including many who are in the informal workforce, could be affected.”
The firm suggested that the government will have to spend around Rs 6 lakh crore (around $79 billion), or 3 per cent of GDP, to not just protect but to revive households, companies, and lenders.
