India's economic growth is likely to decline by 2 percentage points in the next financial year due to the impact of coronavirus pandemic and the consequent 21-day countrywide lockdown, former finance minister Yashwant Sinha said on Friday.
Sinha said India was already facing high unemployment and the pandemic has added to the woes.
"My own estimate is that the 21-day countrywide lockdown which has been enforced, itself will result in shaving off at least 1 percentage point of GDP. And if you take earlier problems created by the coronavirus pandemic before the lockdown and the uncertainties of the future, then a 2 percentage points decline in growth rate(for 2020-21) is not unlikely at all," he said.
Sinha, who has been quite vocal about the Modi government's policies in the last couple of years, noted that the Indian economy has been on a downward trend for 7-8 quarters now, and the decline started long before the coronavirus outbreak.
“If we want to reduce poverty effectively, then we have to grow at least at the rate of 8 per cent, compared to that we are growing at the rate of 5 per cent," he observed.
Talking about the Rs 1.7 lakh crore stimulus package announced by Finance Minister Nirmala Sitharaman , Sinha said it will cost in excess of Rs 1.7 lakh crore, which means fiscal deficit of the government will increase by 1 percentage points(100 bps).
"That will put pressure on government finances which means that the government will have less and less money to invest. So, it is a very serious situation and we need all kinds of innovative pressures to get over the crisis," he noted.
The government on Thursday announced a Rs 1.7 lakh crore stimulus that included free foodgrain and cooking gas to poor for three months, and cash doles to women and poor senior citizens as it looked to ease the economic impact of the nationwide lockdown.
The former finance minister pointed out that the amount of money that has been made available to daily wage earners will depend on how well it is distributed.
"The daily wage earners are not identified. They don't have an ID card, especially in smaller cities and rural areas.
"So, how the money will be distributed to them remains an issue," Sinha wondered.
When asked can India become a USD 5 trillion economy by 2024-25, in the current circumstances, he said in any case it is not possible.
"People who comment on these things have already given up on the basis of facts and figure.
“We will not be able to make India a USD 5 trillion economy by 2030 or 2032 in the normal course, now with this pandemic affecting the entire global economy, our target has to be shifted forward," Sinha asserted.
The Economic Survey had projected India's economic growth at 6 per cent to 6.5 per cent in the next financial year starting April 1. As per the first advanced estimates of the national income released by the National Statistical Office (NSO),India's GDP growth was estimated to slip to a 11 -year low of 5 per cent.
On Friday, RBI Governor Shaktikanta Das said in view of the impact of coronavirus pandemic, the growth projections of 4.7 per cent for March quarter 2019-20 and 5 per cent for the full fiscal are "now at risk".
Moody's Investors Service on Friday slashed its estimate of India's GDP growth during 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.
The number of deaths around the world linked to the new coronavirus has crossed over 24,000. In India, over 700 coronavirus cases have been reported so far.
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