India needs an intelligent lockdown exit strategy to protect the economy from irreversible growth collapse, said SBI Research in a recent report. The country's GDP growth declined to a 11-year low of 4.2 per cent in 2019-20, and to 3.1 per cent in January-March period, a 40-quarter low.
Economic activity has been on a standstill since March 25 after PM Modi announced nationwide lockdown to contain the rising number of coronavirus cases. "We now believe that we should implement an intelligent lockdown exit strategy as the discussion has moved from debate between lives and livelihood to also between lives and lives as an elongated lockdown will only prolong irreversible growth collapse," SBI's Research's latest Ecowrap report said.
Going by past experience, recovery from recession often tends to be slow and takes five to ten years to reach the former peak levels of economic activity, the report added.
Referring to the economic growth data, the report said absence of economic activity due to the lockdown in the last few days of March has dragged GDP growth to a 40-quarter low of 3.1 percent in the fourth quarter of 2019-20. Subsequently, GDP growth in 2019-20 fell to 4.2 per cent compared to 6.1 per cent in the preceding financial year.
In terms of sectors, the only silver lining was agriculture, the Ecowrap report said. "Agriculture and allied activities grew at 4 per cent in the fiscal ended March 2020, compared to the year-ago growth of 2.4 per cent. However, the Central Statistical Office (CSO) has significantly revised the previous quarters' growth rates (compared to third quarter release) which is "quite puzzling and raises questions about data quality and remarkable volatility in the new series and we believe that a methodological note from CSO explaining the frequent revisions will be very useful," it added.
In fact, in February the quarterly numbers underwent significant upward revisions and such numbers have now been steeply revised downwards by an almost equal amount, within a span of three months, the report said.
While it is customary to change the quarterly numbers in May when the third estimate is released, the extent of such revision shows that the loss in fourth quarter because of the lockdown may have possibly been evenly distributed across quarters, that is Rs 1.18 lakh crore loss estimated and distributed across quarters in 2019-20, it said.
"On an unchanged Q1, Q2 and Q3 numbers, the Q4 growth comes at 1.2 percent. As per our calculation only 18 per cent of GVA is exempted from the lockdown and CSO may release data for that segment only for a large part of Q1FY21, and hence we cannot rule out data issues even for Q1," the report said.
"We would like CSO to come out with a methodological note explaining the reasons of why the data has become so volatile in last two-three years," it added.