Workers assemble a car at the Tata Motors factory in Pune in the Indian state of Maharashtra. Photo: AFP

Barclays Plc has said that the Indian government’s extension of the nationwide lockdown, which was imposed to contain the spread of coronavirus, will further aggravate the country’s economic woes in the 2020 calendar year. It has cut its earlier forecast of 2.5% to zero for this period.

The British investment bank made the announcement hours after Indian Prime Minister Narendra Modi extended the three-week lockdown to May 3. Modi hinted that there will be relaxations in unaffected areas from April 20, but they will be based on strict monitoring.

Barclays said the extension will inflict an economic loss of up to US$ 234.4 billion, up from the figure of $120 billion it had earlier projected for the three-week lockdown. For the financial year 2021, Barclays has lowered its growth forecast from 3.5% to 0.8%.

The investment bank said the economic impact will be higher in sectors such as mining, agriculture, manufacturing and services. It sees major losses in states such as Maharashtra, Delhi, Tamil Nadu and Punjab, which are also the most industrialized parts of the country.

Maharashtra tops the list of confirmed Covid-19 cases in the country with over 2,000 patients, while Delhi and Tamil Nadu have over 1,000 cases each. The total number of cases, including those who have recovered and those who died, in the country has crossed 10,000.

Even for states that are likely to rapidly recovery from the pandemic, such as Kerala, Karnataka and Haryana, the low spending on discretionary consumption, such as travel and recreational services, will lead to a shallow pick up in the third quarter.

Barclays has described the recent fiscal stimulus from the government and the central bank as “modest” and does not believe it will offset the lockdown’s negative impact on the economy. It said the full impact of the lockdown will be felt in the second quarter.

As for the post-lockdown period, the investment bank said the pace of recovery will be dependent on government policy support. It said a major policy intervention by the government could spur a faster recovery.

A few days ago the World Bank had projected India’s gross domestic product growth for the fiscal year 2020-21, which started this April, at 1.5-2.8%. It had pointed out that a recovery is likely to be delayed due to global risk aversion.

According to an International Labor Organization report, the Covid-19 crisis may push nearly 400 million Indian workers deeper into poverty.