Covid-19 impact on Indian economy

Indian economy, like the rest of the world, is suffering due to the outbreak of the pandemic which is said to be the worst recession seen since the great depression during the 1930s. The COVID-19 outbreak came at a time when India’s economy was already slowing due to continual financial sector feebleness.

Projection by Prominent Rating agencies:

The World Bank said “India’s economy is expected to grow 1.5% to 2.8% in the 2020-21”.

Goldman Sachs estimated India’s GDP growth forecast to 1.6%. Moody’s Investors Service estimated India growth for calendar year to 0.2%.

The International Monetary Fund (IMF) slashed India’s growth estimate for FY21 to 1.9% from 5.8% estimated in January.

India Ratings & Research has revised its FY21 forecast to 3.6%, while Fitch Ratings puts its estimate for India growth at 2%. S&P Global Ratings has further slashed its GDP growth forecast for the country to 3.5%.

Asian Development Bank (ADB) estimated India’s economic growth to slow down to 4% in the current fiscal (2020-21). This is 2.5% less than its projection of 6.5 per cent made in December 2019.

IMF said “this pandemic will dwarf the economic damage caused by the global financial crisis a decade back”. It also said that India and China would be the only two major economies likely to register growth, with all others contracting.

Suggestions:

Some steps has been taken such as repo rate has been reduced to a historic low of 4.4% by RBI and Finance ministry has introduced a relief package of INR 1.7 lakh crore. But in a country of 1.3 billion people, this package is inadequate. You need reforms like 1991, when there was balance of payment crisis.

The speed of revival will be contingent on policy support by the government. In order to make effective policy, Government should Involve people with proven expertise and capabilities such as Raghuram Rajan, he was the one who anticipated “decade back Global financial crisis”, when he was chief economist of IMF. The government should consult Dr. Manmohan singh, Subramanian Swamy and Abhijit Banerjee by keeping ideology aside at the time of unprecedented crisis. If the government insists on driving everything from the PMO like past, it will do too little, too late.

The government has been using “make in India” for the slogan, this is the appropriate time to seriously focus on it. Government should emphasize on developing a technology-driven transparent Public Distribution System (PDS).