As India went into a three-week lockdown to combat the spread of the novel coronavirus, brokerage firm Barclays drastically reduced growth forecast for calendar year 2020 from earlier 4.5 per cent to 2.5 per cent. It also raised India’s fiscal deficit projections to 5 per cent of GDP from 3.5 per cent earlier. It added that the clause for managing natural calamities could be invoked to find fiscal space.
“In our baseline assumption, we now factor in four full weeks of a complete shutdown, followed by another eight weeks of partial shutdowns across the country until the end of May (of which one week has passed already), as the COVID-19 related precautions will likely remain in the system,” Rahul Bajoria, chief India economist, Barclays said in a note.
The firm also expected the Reserve Bank of India to announce a larger cut in policy rate next month.
While the Finance Ministry has taken several steps, including extension of financial year by three months to ensure that citizens are not put in any distress, it has not yet come out with a concrete stimulus package. Finance Minister Nirmala Sitharaman yesterday announced waiving of charges for cash withdrawals from bank ATMs and suspended penalty fee for being unable to maintain minimum balance in bank accounts for a period of three months. In addition, she relaxed deadlines for payment of income tax and goods and services tax. No penalty would be levied on delay in payment of advance tax, self-assessment tax, tax deducted at sources, tax collected at source among others.
“While the government is yet to release the economic package to provide stimulus to the Indian economy in the aftermath of COVID-19, the announcements made today shall provide immediate relief to taxpayers who are unable to make several tax compliances due to complete lock down or curfew situations prevailing in large parts of the country,” EY said in a statement.
Besides, the Cabinet Committee on Economic Affairs (CCEA), which met on Wednesday approved a Rs 1,340-crore, recapitalization of regional rural banks (RRBs) to improve their capital adequacy in the wake of the spread of the killer disease.
The announcement of these measures has somewhat brought cheer to the equity market. At close on Wednesday, BSE Sensex jumped up 1,862 points at 28536 while NSE Nifty was up 497 points to 8,298..
