India's economy may contract 40% in Q1

New Delhi: As the pandemic and the nationwide lockdown severely hits the economy, India's gross domestic product for the first quarter of the financial year 2020-21 is likely to contract by over 40 per cent, according to an SBI Ecowrap report.

It also estimated that total Gross State Domestic Product (GSDP) loss due to Covid-19 for States stands at Rs 30.3 lakh crore, which is 13.5 per cent of total GSDP.

"We now believe that Q1GDP FY21 loss will be humongous and could even exceed 40 per cent. However, Q2GDP numbers could witness a smart recovery and clock 7.1 per cent, if we are able to sustain the demand," said the report.

It noted that the Q4 GDP numbers for FY20 could be below 1.5 per cent. The Q4 GDP growth may be at 1.2 per cent, with FY20 GDP numbers at4.2 per cent. For FY21, the SBI Ecowrap report has projected a 6.8 per cent contraction in the country's real GDP. On the impact on the States, it said that the loss is maximum, around 50 per cent, in the red zones and where almost all the big districts of India are located. The combined loss of orange and red zones is around 90 per cent of total loss. The loss in the green zones is the least, as 80 per cent of the population in this zone is located in rural areas, which is almost open for all activities, it said. On the prospects of fresh coronavirus cases, it said: "Meanwhile, based on the current 7-days moving average of new cases witnessed in India, we believe that new cases are likely to peak somewhere anytime in the last week of June, beginning June 20."

Following that the new cases are expected to witness steep fall till the beginning of August after which it is expected to flatten by mid-September. However, these are purely based on an assessment of current trends that can rapidly change, it added.