Indian Economy to Struggle with The Economy Through 2025

Bhavisha Madaan

23rd November 2020

Indian economy to struggle with the effects of virus through 2020 (Source: Bloomberg)

NEW DELHI: India will be amongst the major economies of the world to be worst affected by the virus even after the pandemic fades. According to a report by Oxford Economics, the country yield was 12 per cent below the pre-virus levels through the middle of the previous decade, and India’s budding growth is at 4.5 per cent over five years, which is 6.5 per cent lesser than it was before the pandemic.

India’s economy was anticipated to drop over ₹32,000 crores daily during the initial 21-day complete lockdown from March 24 2020 to April 8 2020, which was declared as a result of the coronavirus outbreak. Under complete lockdown, less than a quarter of India’s $2.8 lakh crore economic crusade was functional. Around 60 per cent companies postponed their fund-raising plans for the upcoming 6-12 months. Approximately 43 per cent of organisations testified that they did not foresee an effect on imports. Furthermore, 34 per cent claimed that exports took a blow by more than 10 per cent.

The International Monetary Fund (IMF) predicts that the GDP will shrink by 10.3 per cent in the current financial year till March 2021 as Prime Minister’s abrupt lockdown paralysed all economic activities.

This reduction hasn’t discouraged Prime Minister Narendra Modi from reaffirming his goal of making India a 5-lakh crore dollar economy from 2.8-lakh crore by the year 2025. While the government has acknowledged a mound of measures, they have tumbled relatively short of opportunities to boost demand, leaving the Central Bank to do most of the heavy work. A paper published by the Reserve Bank of India prophesied that Asia’s third-largest economy has entered a momentous technical depression. The official statistics are due November 27. While a sharp rebound is estimated as economic activity resumes, there are many persistent mutilations.

HSBC Holding Plc said that India’s potential growth could drop to 5 per cent in the post-pandemic world, which was 6 per cent on the eve of the epidemic and more than 7 per cent before the worldwide economic crisis. All supply-side aspects feel the consequences, with only human capital’s input untouched from the pre-virus baseline. Capital build-up takes the biggest triumph because balance-sheet is anticipated to deteriorate the next crisis, broadening the investment retrieval cycle.

Problems like these may have been already hindering development prior to 2020- such as strained corporate balance sheets, preeminent non-performing bank assets, the consequence in non-bank financial corporations, and labour market dimness will degrade. The resulting, long-term scars, probably among the worst worldwide, would shove India’s inclination growth considerably lower from pre-COVID-19 levels.

(Sources: The Times of India, The Quint, The Economic Times, Bloomberg)

Edited by: Suditi Jha