India may see its first recession since 1990s: Motilal Oswal

Brokerage firm Motilal Oswal has warned that India could witness its first recession in about three decades amid coronavirus lockdown.

"With two consecutive quarters of GDP decline, India could see its first recession since the 1990s," the brokerage house said in a note on Thursday morning as the nation entered the second day of the complete lockdown to battle COVID-19 pandemic.

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According to the sensitivity analysis of the adverse impact of lockdown, by the firm a single day of complete lockdown could shave off 14-19 basis points (bps) of annual growth and 55-75 bps from quarterly growth.

"It implies that with seven days of complete lockdown and 8 days of partial lockdown, real GDP could decline of about 3% year-on-year (Y-on-Y) in 4QFY20," it said. If this happens, this would be the first de-growth in the country GDP numbers since the government started publishing quarterly numbers from Q1 of 1997-98.

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With 14 days of complete lockdown in April 2020, the brokerage expects the situation to deteriorate further. Assuming things normalise from mid-May 2020, GDP could decline 12.2% Y-on-Y in 1QFY21, it says.

According to various estimates, only 25-40% of the economy is currently operational.