The Indian government’s is taking various majors and effort to boost the COVID-19-hit economy focuses more on the medium-term rather than offering immediate support, according to a recent note by Goldman Sachs economists Prachi Mishra and Andrew Tilton, who predicted India’s gross domestic product (GDP) will contract by an annualised 45 per cent in the second quarter of calendar year 2020. This is more than twice of the 20 per cent slump the global investment banker had predicted in its earlier forecast for the same period.
The researchers expect a stronger sequential rebound of 20 per cent in the third quarter of the year, but they fear that India’s real GDP will fall by 5 per cent this fiscal, which is a major blow to the country’s economy, according to global newswires.
The fact that the lockdown has been extended to May 31, albeit some relaxations, means many sectors, including aviation, will be unable to resume operations. The broader travel and tourism industry continue to bleed as well, they said. While the economists have not changed their projections for the fourth quarter of fiscal 2020-21 (14 per cent), they said that the stimulus announced by the government to deal with the crisis may not be enough to prevent a slow recovery. They said the government’s ₹20-lakh-crore coronavirus relief package for affected businesses and citizens lacks immediate support.
“These reforms are more medium-term in nature, and we, therefore, do not expect these to have an immediate impact on reviving growth. We will continue to monitor their implementation to gauge their effect on the medium-term outlook.” They also mentioned that India’s targeted policy support is ‘tepid’ compared to packages announced by other emerging economies.
They said all the fresh prediction has been based after factoring in all conditions like the extension of the lockdown and workforce constraints. The economists also advised the government to offer ‘discretionary fiscal policy support’ for minimising any further impact of the pandemic on businesses.