$45 billion of discretionary spending may be locked down

ET Intelligence Group: Discretionary spending in India may take a hit of $45 billion (₹3.3 lakh crore) per month due to Covid-19 outbreak, according to a research by Axis Capital. This is equivalent to 1.4% of GDP. On average, an Indian consumer spends about $80 or nearly ₹5,700 per month on discretionary items of which two-third is from urban regions and the balance from rural areas. It includes expenditure on clothing, footwear, household equipment, and recreation.“One month of lockdown could potentially defer discretionary consumption of $45 billion on a pan-India basis, while if lockdown remains concentrated on urban areas it would have the impact of $22 billion,” said Prithviraj Srinivas, economist, Axis Capital. 74800634 The discretionary spending per capita of the urban and rural consumer per month is about $53 (₹3,816) and $26 (₹1,872), respectively. More cases of Covid-19 infection are emerging in big states like Maharashtra, Delhi, Uttar Pradesh, Kerala, Karnataka, and Gujarat which together account for nearly half of the country’s gross domestic product (GDP). Any slowdown in the consumer spending from these states will significantly impact manufacturing and services sectors.This also means the GDPgrowth for FY20 may dwindle. The personal final consumption expenditure was ₹112 lakh crore in FY19 and was estimated to be ₹122 lakh crore in FY20, according to the ministry of statistics and programme implementation (MOSPI). Based on the last year’s GDP of $2,700 billion (around ₹190 lakh crore), the per day GDP contribution works out to be about $7.4 billion (₹51,800 crore). Assuming that 20% of the daily GDP is impacted due to lockdown, it may reduce the GDP by $1.5 billion (₹10,500 crore) every day. With nearly second fortnight of March is affected due to lockdown, the CSO forecast of 4.7% GDP growth for the current fiscal now looks ambitious.

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