Meanwhile govt released tax collection data shows sharp decline in govt income which will have more pressure on treasury. Data shows The Government of India has received Rs. 2,32,860 crore (10.4% of corresponding BE 2020-21 of Total Receipts) upto July, 2020 comprising Rs. 2,02,788 crore Tax Revenue (Net to Centre), Rs. 24,614 crore of Non Tax Revenue and Rs.5,458 crore of Non Debt Capital Receipts. Non Debt Capital Receipts consists of Recovery of Loans (Rs. 5,455 crore) and Disinvestment proceeds (Rs. 3 crore)

Rs. 1,76,009 crore has been transferred to State Governments as Devolution of Share of Taxes by Government of India upto this period which is Rs. 23,903 crore lower than the previous year.

Total Expenditure incurred by Government of India is Rs. 10,54,209 crore (34.65% of corresponding BE 2020-21), out of which Rs. 9,42,360 crore is on Revenue Account and Rs. 1,11,849 crore is on Capital Account. Out of the Total Revenue Expenditure, Rs.1,98,584 crore is on account of Interest Payments and Rs.1,04,638 crore is on account of Major Subsidies.

Govt data marks the likely onset of India’s deepest recession on record, which is widely expected to run through the second half of the fiscal year, as the rapid spread of the pandemic continues to weigh on demand, hindering a pickup in economic activity. Typically, recession is defined as two consecutive quarters of decreasing GDP.

In financial services – the biggest component of the country’s services sector, GDP shrank 5.3 per cent compared to the corresponding period a year ago. In manufacturing and construction, it fell 39.3 per cent and 50.3 per cent respectively. Agriculture bucked the trend, with an expansion of 3.4 per cent.

Though the coronavirus-related restrictions have been gradually lifted, there has been an impact on the economic activities as well as on the data collection mechanisms, the government’s statistics office said. Challenges related to other underlying macroeconomic indicators such as industrial production and consumer inflation will also have implications on these estimates, it said, mentioning likely revisions “in due course”.

The data comes as the government is strategically removing restrictions imposed in March to curb COVID-19 infections, which have caused thousands of job losses and forced the majority of workforce to stay indoors, leading to a big blow to an already-slowing economy.

Chief Economic Adviser Krishnamurthy Subramanian said, “India was in a lockdown all through April to June quarter with majority of economic activities being restricted. So this trend is along expected lines… Core sector output is clearly showing a V-shaped recovery.”

COVID-19 is spreading faster in India than anywhere else in the world, as daily tallies have exceeded those of the US and Brazil for almost two weeks. India currently has more than 3.54 million cases, and 63,498 deaths.

“Foreign investors have pulled an estimated $26 billion out of developing Asian economies and more than $16 billion out of India, increasing concerns of a major economic recession in Asia,” independent Congressional Research Center said in its latest report on global economic effects of COVID-19.

In Europe, over 30 million people in Germany, France, the UK, Spain, and Italy have applied for state support, while first quarter 2020 data indicates that the eurozone economy contracted by 3.8 per cent, the largest quarterly decline since the series started in 1995, it said.

In the US, preliminary data indicated that the GDP fell by 4.8 per cent in the first quarter of 2020, the largest quarterly decline since the fourth quarter of 2008 during the global financial crisis, the CRS said.

According to CRS, the pandemic crisis is challenging governments to implement monetary and fiscal policies that support credit markets and sustain economic activity, while they are implementing policies to develop vaccines and safeguard their citizens.

In doing so, however, differences in policy approaches are straining relations between countries that promote nationalism and those that argue for a coordinated international response.

Differences in policies are also straining relations between developed and developing economies and between northern and southern members of the eurozone, challenging alliances, and raising questions about the future of global leadership, the report said.

While almost all major economies are shrinking as a result of coronavirus, only three countries China, India, and Indonesia are projected to experience small, but positive rates of economic growth in 2020, it said.

The IMF in its recent report argued that recovery of the global economy could be weaker than projected as a result of lingering uncertainty about possible contagion, lack of confidence, and permanent closure of businesses and shifts in the behaviour of firms and household, the CRS said.

Shri Gadkari said, the turnover of the village industry has been around Rs 88 thousand crore, which we aspire to take forward to Rs 5 lakh crore in next two years. He said, the stimulus package announced today, will help achieve this target in a big way. The Khadi sector will play a big role in this as it is entering into exports also.

The Minister was very upbeat over the change of definition of the MSME sector. Raising of investment limit in this sector to Rs 100 crore will give great boost to the industry, which will now get easy finance from banks. The sector was demanding this revision for long, he said. The Fund of Funds, which has a corpus of Rs 10 thousand crore, will benefit over 25 lakh MSMEs under stress. Similarly, easing of global tendering norm is a remarkable step, he said. Shri Gadkari expressed hope that now new orders will be received from Defence and Police for uniforms, etc.

He said, economic support to this sector which gives employment to over 11 crore people and contributes by nearly 29 per cent of GDP, can never be forgotten by the stake holders of this sector. He expressed confidence that the MSME, village and cottage industry sector will grow to new heights with the support of this package.

1. Repo rate reduced by 75 basis points to 4.4%
2. Rev repo reduced by 90 basis points to 4%
3. GDP growth for Q4 19-20 and FY 20-21 to be affected
4. Aggregate demand may weaken
5. Future outlook uncertain and negative
6. CRR reduced by 100 basis points to 3% for 1 year to release 1.37 lakh crores
7. Min daily CRR balance reduced from 90% – 80% till 30/06/2020
8. 3.74 lakh crore liquidity injected
9. 3 month moratorium on payment of instalments of Term Loan outstanding
10. Interest on WC facilities to be deferred by 3 months
11. Such deferment not to be considered for NPA
12. Revised DP calculations by reassessing WC cycle
13. All measures not to effect credit history
14. Total liquidity injection 3.4% of GDP

“On the demand side, inoperability analysis for three sectors, namely transport, tourism and hotels, shows significant impact on demand and hence output. On an aggregate basis, we estimate that the impact of a 5% inoperability shock could be 90 basis points on GDP from trade, hotel and transport, storage and communication segments, that could be spread over FY20 and FY21, with a larger impact in FY21,” the report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said. The report noted that while India had till date responded quite well to the COVID-19 crisis, the financial markets had been significantly impacted.

Since China is an important source of critical inputs for many sectors, the supply shock can lead to to higher price of inputs, which, in turn, could affect the price of all the commodities up the supply chain, it said.
The report also pointed out that a simultaneous demand and supply shock to the economy will also have implications for the banking sector. The demand side shock is expected to lead to an output loss of 1.2% in banking and insurance combined.

“We believe that in the current COVID-19 outbreak, a combination of monetary and fiscal policy could be the best option,” it said.

This shows GDP will reach 5 percent as was predicted and it may go further down. Real GDP or GDP at Constant Prices (2011-12) in the year 2019-20 is likely to attain a level of ₹147.79 lakh crore, as against the Provisional Estimate of GDP for the year 2018-19 of ₹140.78 lakh crore, released on 31st May 2019. The growth in real GDP during 2019-20 is estimated at 5.0 per cent as compared to the growth rate of 6.8 per cent in 2018-19.

Gross Value Added (GVA) at Basic Prices

The sectors which registered growth rate of over 4.9 percent are, ‘Electricity, Gas, Water Supply and Other Utility Services’, ‘Trade, Hotels, Transport, Communication and Services related to Broadcasting’, ‘Financial, Real Estate and Professional Services’ and ‘Public Administration, Defence and Other Services’ at 5.4 per cent, 5.9 per cent, 6.4 per cent, 9.1 per cent respectively. The growth in the ‘Agriculture, Forestry and Fishing’, ‘Mining and Quarrying’, ‘Manufacturing’ and ‘Construction’ is estimated to be 2.8 per cent, 1.5 per cent, 2.0 per cent and 3.2 per cent respectively.

GVA at Basic Prices for 2019-20 from ‘Agriculture, Forestry and Fishing’ sector is estimated to grow by 2.8 per cent as compared to growth of 2.9 per cent in 2018-19. The GVA estimates of this sector are based on 1st advance estimates of agricultural production during Kharif season of 2019-20 obtained from the Ministry of Agriculture & Farmer Welfare. For Livestock sector, estimates of production of major livestock products (i.e. Milk, Egg, Meat and Wool) obtained from the Department of Animal Husbandry & Dairying and Fish production data obtained from Department of Fisheries have been used. The crops including fruits and vegetables account for about 56 per cent, the livestock products 30 per cent and forestry & fisheries 14 per cent share of GVA in total GVA of ‘Agriculture, Forestry and Fishing’ sector.

The Reserve Bank of India (RBI) on Thursday went against majority expectations and kept repo rate unchanged at 5.15 per cent in its fifth bi-monthly policy review of the year.

A large number of economists exuded confidence that RBI’s six-member Monetary Policy Committee (MPC) would lower the key interest rate once again as growth in the second quarter reached a six-year low of 4.5 per cent.

However, the central bank already cut repo rate — at which banks lend from the RBI — five times since January without any improvement in growth.

All six members of the RBI’s MPC voted against the cut but maintained an accommodative stance, allowing it to act whenever necessary.

In what seems to be another setback, the central bank also lowered its GDP growth forecast for the entire year to 5 per cent from 6.1 per cent.

In a statement released after the announcement, RBI said, “GDP growth for Q2 turned out to be significantly lower than projected. Various high-frequency indicators suggest that domestic and external demand conditions have remained weak. Based on the early results, the business expectations index of the Reserve Bank’s industrial outlook survey indicates a marginal pickup in business sentiments in Q4.”

RBI also added that overall sentiments are muted in several key sectors including manufacturing and construction. It expressed concern over contraction in the output of eight core industries as well.