Chart: Who Bore The Brunt Of India’s Rs 20-Lakh-Crore GDP Loss
A Credit Suisse analysis breaks down the GDP loss and its long-term impact.
The government and wage earners took bulk of the Rs 20-lakh-crore hit to the Indian economy, which saw a record contraction in the quarter ended June, according to Credit Suisse.
“We estimate the government bears 50% of the loss, wage earners 25%, informal firms 15% and corporations the remaining 10%,” the research firm said in a recent note. While much of that is already “water under the bridge”, the loss will have a lasting impact on the economy, it said.
Low-income workers will be the worst impacted. This group will emerge with fewer assets and higher debt over and above the loss in wages that they have already experienced.
Another significant impact will be on state governments that are already struggling to make ends meet amid the Covid-19 pandemic. State governments contribute to almost one-tenth of all capital expenditure in the country and sustained fiscal stress will put that under pressure, Credit Suisse said.
Private capital expenditure, too, will decline as corporates retain more of their earnings amid the uncertainty, according to Credit Suisse. That said, high-income workers are expected to emerge with more financial savings.
Still, the research firm said the economic impact of Covid-19 has started fading. A meaningful recovery should be visible by March 2021 if the infection fatality keeps falling and people become less afraid of the virus. “With the structural factors that earlier drove 5-6% GDP growth still in play, but with diluted potency, GDP should stop falling YoY by Q4 FY21 despite elevated infections.”