HYDERABAD: The lockdown extension beyond May, if any, will likely take India’s GDP growth to even zero, according to rating agency CRISIL.

CRISIL on Friday downgraded the country’s FY21 growth outlook to 1.8 per cent from its earlier estimate of 3.5 per cent. It also acknowledged the possibility of a global recession due to the deep contraction in advanced countries.

The Indian government on Friday extended the lockdown restrictions for two weeks till May 17.

“Risks to our India forecast are tilted to the downside, manifestation of which could take GDP growth to even zero,” said CRISIL Research.

Dharmakirti Joshi, chief economist at CRISIL, believes there could be a permanent loss of 4 per cent of the GDP.

“Fiscal 2022 is likely to see a V-shaped recovery at over 7 per cent real GDP growth. But even assuming growth sustains at this level for the next three years, real GDP will stay below its pre-Covid-19 trend path,” he explained.

According to him, the lockdown has started hurting already. In March, for instance, automobile sales contracted 44 per cent on-year even as exports fell 35 per cent with the worst yet to come.

“This deep slowdown and across the broad plain leaves large swathes of India’s informal workforce vulnerable, particularly in construction, manufacturing and services sectors,” he said.

The most affected are daily wage earners. India’s casual labourers, comprising almost 25 per cent of the workforce, would be the first hit due to the shutdown-layoffs.

A CRISIL Research analysis of over 40,000 companies with employee cost of Rs 12 lakh crore indicates that about 52 per cent of the employee cost is incurred by companies in sectors that will see a material increase in stress in case of an extended lockdown.

MSMEs are more vulnerable than larger players, especially on the liquidity front. CRISIL estimates that even in a relatively milder slowdown than expected this fiscal, MSME working capital can stretch by over a month.

“In the year ahead, we expect consumer discretionary services and products such as airlines, hotels, automobiles and consumer durables to be the worst-hit. Non-pharma exporters, real estate and construction companies also face one of their worst years. Even resilient sectors such as IT services will see muted growth as global budgets on IT spending fall,” it noted.

According to the report, poor credit growth, including retails loans, along with rising NPAs and credit costs will singe banks and NBFCs.

It expects banking sector NPAs to rise to 11-11.5 per cent by March 2021 from an estimated at 9.6 per cent as of March 2020, with sharply lower recoveries and rising slippages.