Q4 GDP: Where will India be when this dreadful year finally ends? Today's numbers will show the first signs

As litmus tests go, today's GDP data will be like no other in memory.

The GDP numbers for Q4 of FY20, to be released later today, will show us where the Indian economy stood during the three months through March — the last seven days of which overlapped with the first seven of this unprecedented nationwide curb.

As it turned out, that one single week of lost production pulled March IIP down by a massive, massive 16.7%. This, in combination with other key indicators, appears to be a clear sign that we are probably headed for what will only be the fourth recession in post-Independence India's economic history.

Will the (inevitable) slide in growth in January-March mark the beginning of a full-year negative GDP print as is being widely projected? Below is how forecasts by brokerages and ratings agencies have put things in perspective.

Covid kill rate in economic terms
ICRA has estimated that the Indian economy will grow by 1.9 per cent in the January-March period while for the entire fiscal (FY2019-20), it projects a growth rate of 4.3 per cent. This is in stark contrast to a growth of 6.1 per cent registered in FY19.

Similarly, CRISIL has also forecast the economic growth for January-March quarter to come in at a dismal 0.5 per cent while it estimates FY20 growth at 4 per cent.

An SBI research report has pegged the economy to clock 1.2 per cent growth in the January-March period owing to stalling of economic activity in the last week of March after a nationwide lockdown was imposed on March 25. For the entire fiscal year FY20, SBI predicts a growth rate of 4.2 per cent.

A Reuters poll of 52 economists indicated that the economy expanded by a mere 2.1 per cent in the fourth quarter of FY20, weakest in at least eight years. Around six economists in that poll predicted the economy to shrink in the January-March quarter.

"The impact of the Covid-19 outbreak on travel, tourism and hospitality, government expenditure compression amidst revenue shortfalls in March 2020, and subdued credit growth are expected to have adversely impacted service sector performance in Q4 FY2020," Aditi Nayar, principal economist, ICRA, commented.

When 0% is the best growth rate
The nationwide lockdown announced from March 25 brought the entire economy to a standstill amid rising cases of Covid-19. The successive iterations of the lockdown saw graded relaxations being offered and a semblance of normalcy returning in May.

The GDP print for the January-March period will mark the beginning of a year in which there's a unanimous consensus among economists and experts that the economy will contract or, at best, register zero growth.

The month of April could be the worst hit as it bore the full impact of the nationwide lockdown before the country started to see curbs easing.

The Reserve Bank of India Governor, Shaktikanta Das, last week, announced that the economy is going to contract in the current fiscal. He refrained from putting out a figure but said that growth impulses could strengthen in the latter half of the current fiscal.

In his address, Das said that both demand compression and supply disruption will hit the economy with private consumption, forming 60% of demand, the hardest hit.

The only silver lining for India
Both Fitch and CRISIL have projected the economy to contract by 5 per cent in FY21 while SBI sees a de-growth of 6.8 per cent in the same fiscal.

Goldman Sachs has said that the economy will contract by a staggering 45 per cent in the April-June period. CRISIL estimates the economy to shrink by 25 per cent in the same period.

The only silver lining could be agricultural growth that's expected to remain stable on the back of expectations of a good monsoon.

"The recession staring at us today is different. For one, agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. Two, the pandemic-induced lockdowns have affected most non-agriculture sectors. And three, the global disruption has upended whatever opportunities India had on the exports front," CRISIL observed in its report that predicted the economy could shrink by 5 per cent in FY21.

Happy with the stimulus? Not so fast
The Rs 20.9 lakh crore package that the finance minister Nirmala Sitharaman announced in five tranches has also failed to bring cheer. The package aims to usher in reforms over a medium term period instead of a magic bullet that the economy currently needs.

"The package has some short-term measures to cushion the economy, but sets its sights majorly on reforms, most of which will have payoffs only over the medium term," the CRISIL report stated.

For now, the economy is stuttering along even as Covid-19 cases continue to rise. The country is starting to learn to live with the virus and people are returning to work. Restrictions have eased except in containment zones. Railways and domestic flights have resumed operations, albeit with much-reduced capacity.

Recovery, if any, is likely to be some time away, and will remain under the cloud of a possible second outbreak.