New Delhi/Mumbai: Key macro indicators painted a grim picture of the economy as COVID-19 induced turbulence dealt a severe blow to India's core industries, deficit and debt levels. However, the data points range from March-end period till May. Economic activity was severely hit during this period due to movement restrictions imposed under the national lockdown.

The national lockdown and its subsequent phases started in late March and lasted till end of May.

At present, India is under the 'Unlock' phase to restart economic activities and allow greater movement of individuals and goods at the national and local levels.

One of the key macro-economic indicators -- the Index of Eight Core Industries for May 2020 declined by 23.4 per cent (provisional) compared to decline of 37 per cent (provisional) during the previous month of April 2020.

However, the rate of fall in the Index of Eight Core Industries decelerated on a sequential basis on account of partial opening of economic activities during May 2020.

"In view of nationwide lockdown during April and May 2020 due to COVID-19 pandemic, various industries viz. coal, cement, steel, natural gas, refinery, crude oil etc. experienced substantial loss of production," the Ministry of Commerce and Industry said in a statement.

"Final growth rate of Index of Eight Core Industries for February 2020 is revised at 6.4 per cent."

ICRA Principal Economist Aditi Nayar said: "The pace of contraction in the core sector industries narrowed appreciably to 23.4 per cent in May 2020, bettering our forecast of 25-30 per cent. The improvement relative to April 2020 was chiefly driven by cement, steel, electricity and fertilisers, in addition to modest improvements in coal, natural gas and refinery production. Only crude oil output recorded a worse performance in May 2020 relative to April 2020."

"Based on the available trends, we expect the pace of contraction in the Index of Industrial Production to narrow to around 35-45 percent in May 2020 from 55.5 percent in April 2020."

Not just production, trade and taxes associated with it have been disturbed. This caused a massive erosion in tax collection, with total receipts during April-May FY20 coming in at just Rs 45,498 crore (2 percent of BE). The tax revenue stood at Rs 33,850 crore during this period (2.1 percent of BE).

Consequently, India's budgetary fiscal deficit for the April-May 2020-21 period stood at Rs 4.66 lakh crore, or 58.6 percent of the budget estimates (BE).

The government has targeted a fiscal deficit of Rs 7.96 lakh crore for the fiscal year 2020-21.

As per the Controller General of Accounts (CGA) data released on Tuesday, the fiscal deficit during the corresponding months of the previous fiscal was 52 percent of that year's target.

The Central government's total expenditure stood at Rs 5.11 lakh crore (16.8 percent of BE.

Another data set showed that higher commercial borrowings led to a rise in India's external debt for the quarter ended March 2020 to $558.5 billion.

"At end-March 2020, India's external debt was placed at $558.5 billion, recording an increase of $15.4 billion over its level at end-March 2019," the RBI said.

"Commercial borrowings remained the largest component of external debt, with a share of 39.4 percent, followed by non-resident deposits (23.4 percent) and short-term trade credit (18.2 percent)."

According to M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings: "External debt as a ratio of GDP has shown a marginal increase to 20.6 percent in 2020 as compared to 19.6 in the previous year."

"The outlook on this front does not look bright as the economy may have to settle down to a lower level equilibrium due to lockdown and restrictions during 2021."

On a positive note, India posted a marginal current account surplus in Q4FY20 on the back of the lower trade deficit, along with higher remittances.

However, the RBI data on India's Balance of Payments (BoP) showed that on a fiscal year basis, the current account balance was in deficit.

The current account is the net difference between inflows and outflows of foreign currencies.

In 2019-20, India's CAD narrowed to 0.9 percent of the GDP in 2019-20 from 2.1 percent in 2018-19 on the back of the trade deficit which shrank to $157.5 billion in 2019-20 from $180.3 billion in 2018-19.

On the quarterly basis, the current account balance recorded a marginal surplus of $0.6 billion (0.1 percent of GDP) in Q4 of 2019-20 as against a deficit of $4.6 billion (0.7 percent of GDP) in Q4 of 2018-19 and $2.6 billion (0.4 percent of GDP) in the preceding quarter - Q3 of FY20.

"The surplus in the current account in Q4 of 2019-20 was primarily on account of a lower trade deficit at $35 billion and a sharp rise in net invisible receipts at $35.6 billion as compared with the corresponding period of last year," the RBI said in its statement on developments in India's Q4FY20 BoP.

"Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $20.6 billion, up by 14.8 percent from their level a year ago."

In a report, Edelweiss Securities' Forex and Rates lead Economist Madhavi Arora while commenting on the external sector said overall, the rupee's performance will be caught between improving external terms of trade, evolving global risk appetite, home-grown issues of fiscal fragility and RBI stance on the rupee (IANS)