On Sunday, the World Bank, in its 'South Asia Economic Update: Impact of COVID-19', said the coronavirus pandemic has severely disrupted the Indian economy, magnifying pre-existing risks to its outlook. "The Indian economy is expected to decelerate to 5 per cent in 2020, and the projection is for a sharp growth deceleration in fiscal 2021 to 2.8 per cent in a baseline scenario. The COVID-19 outbreak came at a time when India's economy was already slowing, due to persistent financial sector weaknesses," the report noted.
In an attempt to stem the spread of coronavirus in India, Prime Minister Modi had announced a nationwide lockdown for three weeks. This is expected to be further extended, though PM Modi will now draw a fine line between lives and livelihood. The government is undertaking measures to contain the health and economic fallout, and the RBI has begun providing calibrated support in the form of policy rate cuts and regulatory forbearance.
"The resulting domestic supply and demand disruptions [on the back of weak external demand] are expected to result in a sharp growth deceleration in FY21 to 2.8 per cent in a baseline scenario [an estimate subject to wide confidence intervals]," the report said. "Growth is expected to rebound to 5.0 per cent in fiscal 2022 as the impact of COVID-19 dissipates, and fiscal and monetary policy support pays off with a lag".
Earlier, a United Nations International Labour Organisation (ILO) report claimed that the COVID-19 crisis has the potential to push around 40 crore informal sector workers in India deeper into poverty, with the lockdown and other containment measures affecting jobs and earnings. As per ILO, India is among the countries less equipped to handle the situation.
"COVID-19 is already affecting tens of millions of informal workers. In India, Nigeria and Brazil, the number of workers in the informal economy affected by the lockdown and other containment measures is substantial," the ILO report released in Geneva said.
"In India, with a share of almost 90 per cent of people working in the informal economy, about 400 million workers in the informal economy are at risk of falling deeper into poverty during the crisis."
In a conference call with reporters, World Bank Chief Economist for South Asia Hans Timmer said India's outlook is not good. And if the domestic lockdown is prolonged, then the economic result can be much worse than what the World Bank has in its baseline range of forecasts.
Among the steps that India can take to address this challenge, Timmer said the first step is to focus on mitigating the spread of the disease, and to make sure that everybody has food.
