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Prediction of FY21’s Economic Growth

Published: August 18, 2020
Author: G.Thulessiraman

India has never experienced such a negative economic growth since 1979-80 and before that. The real GDP decline of 5-10% that various agencies are projecting for India in FY’20 would be the country’s first ever not triggered accompanied by an agriculture or a balance of payment crisis.

It is believed that India is having a classic “western-style” demand slowdown condition which has turned into a full-fledged recession bereft of consumption and investment demand, post Covid-19. The demand side uncertainty and the economic contraction is something new to the country.

SBI economists pointed out that, there has been a corporate gross value added degrowth, which is significantly better than revenue degrowth in Q1FY21 as far as the results of the listed companies are added. They also said, “We revisit our GDP growth estimation for Q1 FY21 (at lower than -20 per cent) and now peg it at much lower contraction: -16.5 per cent, though with the relevant caveats in the current uncertain scenario.”

Economists have warned that recovery is the economic condition may take a while as long as the virus spreads and the infection numbers rise, which lead to local lockdowns. The contraction in the GDP estimates ranged from 13.6% to 25.7% and are in line with those seen in other countries hit hard by coronavirus. Even if the contraction hits the lower end, this contraction will be historic. There has been a nascent recovery in the economy although the recovery and growth of the nation has to be taken in control by India. The recovery of the economy is being affected by the lockdown.

The lockdown in India began in March, in June unlock procedure began. Since June there has been a recovery in various economic activity, but July saw states being forced to implement shutdowns in containment zones amid fresh outbreaks, denting the uptick. Soumya Kanti Ghosh, group chief economic adviser of State Bank of India said that,” We need to have a structured approach to on-and-off lockdowns and have a comprehensive fiscal plan to help the states so that the states can get the desired confidence and mojo back! As of now, containing the virus in rural areas must be the top priority.”

Ghosh said separately that, the pandemic is growing at a much faster rate than the opening up of the economy, and there is a possibility of rise in the mortality rate up to 0.5-3.5%.



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