The Indian economy will not be in the clear as latest COVID numbers will weigh the economy further down while unemployment rates increase further.
With COVID infections already above 52 lakhs as per the latest data and daily infections hovering over 90,000 cases of fresh cases every 24 hours, the failure to plateau the first wave numbers has adversely affected the business activity across all the segments, as Production and Supply-side pressures mount up.
The purchasing power of the middle-class population of the Indian economy was severely hit as non-payment and layoffs surged during the lockdown. According to Centre for Monitoring Indian Economy (CMIE), as many as 6.6 million white-collar professional jobs, including engineers, physicians, teachers, were lost between May and August, bringing their employment to the lowest level since 2016 and wiping out the gains made over the last four years while five million industrial workers were out of work during the period.
Financial institutions like Asian Development Bank have recently cut India’s growth projections from already historic lows as the virus continues to spread. ADB expects that the Indian economy will contract by 9 percent in FY 2020-21.
Goldman Sachs Group now estimates a 14.8 percent contraction in gross domestic product for the year through March 2021. The Organisation for Economic Co-operation and Development sees the economy shrinking by 10.2 percent.
Goldman Sachs’s latest growth forecast came last week after data showed gross domestic product plunged 23.9% in the April-June quarter from a year ago, the biggest decline since records began in 1996 and the worst performance of major economies tracked by Bloomberg.
While every other financial institution showed the Indian economy in the red, the Indian Central Bank, RBI maintains that there are good days ahead although in near future. RBI Governor Shaktikanta Das on Wednesday said the country’s economic recovery will be gradual as the impact of Covid-19 has still not subsided.
Maintaining cautious optimism he added, “Recovery is not yet fully entranched. In some sectors, the optic noticed in June and July appear to have levelled off. By all indications, the recovery is likely to be gradual as efforts towards reopening of the economy are confronted with rising infections.”
While India’s economy is going through a period of severe economic crisis amidst the pandemic lockdown, Das said that some high frequency indicators have improved and indicate “some stabilisation” of economic activity in the second quarter of the current fiscal year.
“Contractions in many other sectors simultaneously easing,” he said. Shaktikanta Das went on to say that the central bank has ensured adequate liquidity infusion to facilitate borrowing by the government at low rate. Das also said that the central bank is “battle-ready” to take whatever steps needed to further stabilise the ailing economy. Bloomberg, on the other hand, has given a little more clarity on the issue of revival. “We expect a 10.6% contraction in fiscal 2021, rebound in 2022, and slower path for growth as scars from the virus recession drag on the remaining years of the decade,” Bloomberg economist said.