New Delhi | Jagran Business Desk: Analysts have pegged the cost of the coronavirus lockdown at USD 120 billion (approximately Rs 9 lakh crore) or 4 per cent of the GDP. They have sharply cut the growth estimates while stressing on the need to announce an economic package. 

The Reserve Bank of India (RBI), which is scheduled to announce its first bi-monthly policy review on April 3, is set to deliver deep rate cuts and it should also be assumed that the fiscal deficit targets will be breached, news agency PTI quoted analysts as saying.

Prime Minister Narendra Modi announced a three-week complete lockdown of the country to prevent the spread of the coronavirus infections in the country. The equity markets were in the red early into the trade on Wednesday, down 0.47 per cent.

“We estimate that the cumulative shutdown cost around USD120 billion or 4 per cent of the gross domestic product (GDP),” British brokerage Barclays said in a note, revising down its FY21 growth forecast by 1.7 percentage points to 3.5 per cent.

It specified the cost of the three-week nationwide lockdown to be alone at USD 90 billion, which is over and above the lockdowns announced by various states like Maharashtra earlier.

They also said that the RBI is most likely to go for a 0.65 per cent rate cut in the April review and will slash interest rates further by 1 per cent during the course of the year.

Domestic brokerage Emkay congratulated policymakers for acting earlier than other countries, but rued that there is not much to cushion the economic impact.

“The Indian government has so far been largely silent on the economic impact from the lockdown, leave alone any measures to cushion the hit,” it said.

The unorganised sector, which is already reeling under the twin impact of demonetisation and goods and services tax (GST), will be pushed to the brink because of these measures, Emkay warned.

It suggested soft loans to smaller businesses, loan restructuring and cash transfers as the possible tools the government can adopt as part of the economic package.

Analysts at Barclays said the government will most likely invoke the cause for natural calamities under the fiscal prudence framework in FY21 and estimated the fiscal deficit to come at 5 per cent of GDP versus the 3.5 per cent budget target.

Govt likely to unveil Rs 1.5 lakh crore stimulus package

Meanwhile, accordoing to a Reuters report, the government is working on a economic stimulus package of rs 1.5 lakh crore to fight the downturn in the country. 

The report quoted sources saying that while the package has not been finalised yet, discussions are ongoing between Prime Minister Narendra Modi's office, the finance ministry, and Reserve Bank of India (RBI).

One of the sources, a senior government official, said the stimulus plan could be as large as 2.3 trillion rupees, but final numbers were still in discussion.

The package, which could be announced by the end of the week, will be used to put money directly into the accounts of more than 100 million poor and to support businesses hit the hardest by the lockdown, the sources said.

(With inputs from agencies)

Posted By: Abhinav Gupta