Lockdown loss seen at `13-17 lakh crore

Analysts say stimulus cannot compensate for loss

The country's economic loss from stagnant activity during the lockdown is estimated to be between Rs

13 lakh crore and Rs 17 lakh crore. Economists find that the additional fiscal provision of Rs 2 lakh crore made by the government through the stimulus package will be hardly sufficient to compensate this mammoth loss.

The six-week lockdown loss is estimated at Rs 13 lakh crore by domestic brokerage Emkay Global Financial Services while British brokerage Barclays estimates the country has lost around Rs 17.7 lakh crore during the period.

"Most of the sectors had zero activity during the lockdown and some operating industries were underutilised and even large stores were selling only essential items. So for the loss that has occurred during the six-week lockdown has been estimated to be Rs

13 lakh crore," said Sunil Thirumalai, head of research, Emkay Global.

According to Rahul Bajoria, chief India economist, Barclays, the loss it estimated pertains to only inactivity during the lockdown and does not take into consideration the shutting down of shops, industrial units and services later as fallout of the lockdown.

However, both find that the economic package announced by the government will not be able to

compensate this loss, with a mere additional spending of Rs 2 lakh crore.

"Although the size of relief measures announcement of the government was indeed higher than Rs 20 lakh crore we believe that we would still not qualify it as a stimulus package," said Thirumalai. "Only one per cent (Rs 2 L crore) of GDP is given to compensate for the income loss, which is not likely to be sufficient, forget being reflationary," he added.

Many measures have been announced, like credit guarantee, RBI's liquidity measures, reforms and infrastructure spend. However, these will take a while to materialise to have an impact on growth.

"The loss due to lockdown has to be compensated by the government as grants. Loans will take care of the business entity in the future if it survives," Thirumalai said.

"Credit guarantee and loans can play only a mitigating role, not compensate the loss," said Bajoria.

Most government measures addresses the supply side issues and hence the demand recovery would be very gradual. The onus is now on the RBI and on the banks to improve transmission to needed sectors.

The government has revised the MNREGA allocation by Rs 40,000 crore to a total of Rs 1 lakh crore. “Once the migration issue is sorted, we believe the MNREGA demand is likely to be way higher. We believe there would be an eventual increase in PMKisan too. But even with the higher allocation in these two schemes, it would not raise the overall rural income as the lockdown impacted some agri produce and the reverse migration would hurt remittances that even MNREGA won't be able to compensate," said Thirumalai.