India’s fourth recession since independence, the first since liberalisation and perhaps the worst to date, is here, Crisil said on Tuesday as it predicted the economy to shrink by 5 per cent in the current fiscal because of the nationwide lockdown.

“The first quarter (April to June 2020) will suffer a staggering 25 per cent contraction,” it said in its assessment of India’s GDP.

“About 10% of gross domestic product (GDP) in real terms could be permanently lost. So going back to the growth rates seen before the pandemic is unlikely in the next three fiscals.”

In the past 69 years, India has seen recession only thrice — according to available data — in fiscals 1958, 1966 and 1980. The reason was the same each time – a monsoon shock that hit agriculture, then a sizeable part of the economy.

Crisil said the recession in the current fiscal (April 2020 to March 2021) is different as agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. The coronavirus lockdown, first imposed on March 25 and extended thrice till May 31, has curtailed economic activity severely. “The first quarter of this fiscal will be the worst affected,” it said.

States deficit jumps

Led by a massive spike in revenue deficit of 2.8 per cent of GDP, the aggregate fiscal deficit of the states will rise to 4.5 per cent of the GDP in 2020-21 at Rs 8.5 lakh crore as against the earlier forecast of 3 per cent of GDP, says a report.

The Centre has allowed the states to borrow 200 bps more than the legally mandated 3 per cent deficit while the Centre itself has upped its borrowing targets by Rs 4.2 lakh crore.