Economists Say Rapid Rise In COVID-19 Cases Could Delay Recovery In Already Slowing Economy
India’s gross domestic product or GDP contracted 23.9 percent in the April-June period, official data showed today, as disruptions induced by the coronavirus pandemic damaged businesses and livelihoods across the country. Despite the monetary and fiscal support of Rs 21 lakh crore. That marked the worst incidence of negative growth for the economy since 1996, when India began publishing quarterly figures, and also the worst among the major Asian economies. Today’s reading, which fully captures the impact of the coronavirus crisis on economic and business activity, contrasts with the 3.1% expansion in the previous quarter and 5.2% in the quarter ended June 30, 2019.
Here are 10 things to know:
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Today’s data marks the likely start of India’s deepest recession, which is expected to continue into the second half of the fiscal year as the rapid spread of the pandemic continues to weigh on demand, making it difficult to rebound in economic activity. Generally, recession is defined as two consecutive quarters of decline in GDP.
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The data comes as the government is strategically removing restrictions imposed in March to curb COVID-19 infections, which have caused thousands of lost jobs and forced the majority of the workforce to stay at home, resulting in a huge blow to an already slowing economy.
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Economists in a survey by the Bloomberg news agency expected the contraction in the June quarter to be in the range of 15-25.9 percent, with a median estimate of 19.2 percent.
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Although restrictions related to the coronavirus have been gradually lifted, there has been an impact on economic activities as well as data collection mechanisms, the government statistics office said.
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COVID-19 is spreading faster in India than anywhere else in the world, as daily counts have surpassed those in the US and Brazil for nearly two weeks. India currently has more than 3.54 million cases and 63,498 deaths.
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Challenges related to other underlying macroeconomic indicators, such as industrial production and consumer inflation, will also have implications for these estimates, he said, mentioning possible revisions “in due course.”
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Economists say the rapid rise in COVID-19 cases amid strained public finances and skyrocketing inflation means a recovery may not come soon.
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In May, the government announced fiscal and monetary support worth 21 lakh crore rupees, equivalent to about 10 percent of the country’s GDP. Many economists have said that much of that support was already budgeted for by the government and very little included new spending.
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The Reserve Bank of India has cut key interest rates by 115 basis points (1.15 percentage points) since March to revive economic activity, but is on the lookout for worsening inflationary pressures. It has already changed course to focus on economic health for the time being, rather than inflation.
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Before the pandemic, Prime Minister Narendra Modi’s administration aimed to transform India from a $ 2.8 trillion economy to $ 5 trillion by 2024, despite slowing growth and low demand.
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