by our correspondent:
While most developed economies including the US and UK would be registering a negative growth rate, India would be among the very few countries who hope to achieve an almost 2 per cent growth rate this financial year.
The Indian Government’s decision to enforce a complete lockdown to tide over the COVID-19 pandemic, while essential for public safety, has resulted in the loss of economic activity and could lead to a recession in the near future. However, one needs to understand that India is not in a bad situation and can still take control of the circumstances.The International Monetary Fund (IMF) recently predicted that the average growth of world economies for this financial year would be to the tune of negative 3 per cent. Among the G20 nations which India is a part of, barring India, China and Indonesia, all the 17 countries would be registering a negative return. In the pre-COVI-19 scenario, the US expected to register a 1.7 per cent growth rate but is now expected to register a negative growth of (-)5.9 per cent for the year 2020. The UK expects to register negative growth to almost (-)6.5 per cent in the year 2020, in comparison to the 1.4 per cent recorded last year.
The growth rate of India is expected to be in the range of 1.9 per cent for the year 2020. If there is 2nd or 3rd wave, normalcy is likely to return in the second half of the year 2020. Due to policy measures taken by the Central Government and adherence by the State Governments, the situation is stabilizing, with some activities resuming as early as 20th April 2020. India’s economy is expected to bounce back to 7.4 per cent in the year 2021, based on the robust collaboration of the Government and the industry.The stimulus package that the Indian Government has currently envisaged is inadequate. The Government needs to put together a stimulus package of at least $200- $300 billion immediately which would kick start the wheels of the economy.
This can be in a staggered manner out of which $100 billion needs to be provided immediately, the next $100 billion can be provided in the next 3-4 months while the last $100 billion can be infused in the next 4 months post that.In the disease and affected scenario the peak and recovery phase scenario is based on the assumption that strict social-distancing measures will continue to be government policy. As India has started to reopen the economy amid the rapidly rising cases, there is a major risk that Covid-19 cases will not decline in the near future.
The economic impact will play a role in determining when the country can open and India has decided that complete lockdown for long periods is no longer viable. However, the timing of when to lift the lockdown has to be right; otherwise, the Covid-19 cases could very easily see an exponential rise, which can overwhelm the healthcare system of India. Moving forward, India must still remain vigilant, develop an effective test and contact-tracing policy, and be prepared to shut down geographical areas where outbreak hotspots occur.The peak and recovery phase scenario has some limitations, including (but not limited to) accuracy of testing, testing availability, testing speed, speed of reporting, and accuracy of reporting. GlobalData will continue to monitor developments and will improve the model when more data are available.
