COVID impact on India economy far worse than imagined

Considering the state of the Indian economy before the coronavirus pandemic, it was certain even then that the nation would witness a downfall in the economy and after the outbreak, the speed has doubled towards an all-time low statistics. But now, to the horror of people, experts have said that the coronavirus outbreak will impact the economy in a far bigger way than imagined.

The firms which had predicted earlier for this financial year have once again forecasted the number and have come to the conclusion that the forecast contractions are much deeper than the previous ones. Numbers from Fitch ratings, India ratings, and American brokerage Goldman Sachs have a similar projection for this year.

India Ratings had earlier projected a contraction of 5.3 percent but now they have revised it to 11.8, which is a big leap from what was expected. Goldman Sachs has predicted the sharpest contraction of 14.8 percent while Fitch ratings forecasted a 10.5 percent contraction.

When Asian Development Outlook had released its numbers in June this year, 4 percent contraction was predicted but seeing how the contraction has taken an incredible jump, experts say that if some major effective measures are not taken then the economy will be unrecoverable. Many economists had projected the contraction to be under 20 percent for the June quarter but unlike what they said, the contraction stood at 23.9 percent, the worst among G20 countries.

Former Reserve Bank of India governor, Raghuram Rajan also expressed concerns about the degrading GDP of the country. He said that if informal sectors were to be accounted for, the contraction would worsen.

“The pandemic is still raging in India, so discretionary spending, especially on high contact services like restaurants, and associated employment, will stay low until the virus is contained. The government provided relief becomes all the more important.”

He further expressed fear that the government has dived into a saving mode, where their strategy is to conserve resources today for the future which is ‘self-defeating’. He highlighted the need for the government to spend cleverly and to come up with a plan that would let them spend on stimulus and relief. He suggested ways to counter the economic contraction and one of the major ones remained distribution of cash, a move earlier supported by former Prime Minister, Manmohan Singh.

Prioritizing domestic and small enterprises should be one of the core agenda of the government right now, Rajan hinted.

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