Do you see a major contraction in GDP in the current financial year?

The McKinsey Global Institute or MGI has estimated that Indian GDP could contract between 3% and 9% in the fiscal year 2020-21 depending on how effective the government growth measures turn out to be and how industry reacts to the measures.

The report by MGI warned that the pandemic-induced economic shock could put banks under stress and bad loans could rise by 7-14% in FY21. However, MGI has pointed out that the steps taken by the government to alleviate the pain could help partially offset the pain.

MGI proposes a series of measures to bring India back to a sustained 8-8.5% real GDP growth rate all the way to 2030. These include flexible labour markets, stronger social security net, removing duty anomalies, tax breaks for home ownership and power reforms.

Above all, MGI report calls for reducing the cost of capital and has suggested that nearly 4% of household savings could move to financial products. It has also warned of the fiscal impact of the major stimulus announced by the government.