Mumbai: India has now entered the fourth phase of lockdown to curb the spread of the pandemic COVID-19. To some extent, India has been able to contain the spread of COVID-19. The lockdown first implemented March 25 is one of the major reasons for that.
Economic slump
However, everything comes at a price. The lockdown has had a brutal effect on Indian economy. Millions have been rendered jobless, small and medium industries have either closed down or suffered heavy losses. Even the major players are unsure when the economy will again stabilise.
One of the topmost financial institutions in the world, Golden Sachs has said in a recent report that India will face its deepest recession ever. This is because the economy has been severely damaged due to the lockdown which is now close to two months old.
Fall in GDP
Economists Prachi Mishra and Andrew Tilton have prepared a note on the Indian economy for Golden Sachs. The note dated May 17, 2020 states that GDP will fall by 45 per cent in the second quarter of the present fiscal in comparison to the corresponding period last year. For the second quarter in the 2020-21 fiscal, Goldman had previously projected a slump of 20 per cent. However, with the lockdown being extended, the fall is expected to be more than double.
Goldman Sachs has also said that a rebound of 20% is expected in the third quarter. However, projections for the fourth quarter of the current financial year and first of the next fiscal will remain unchanged at 14 per cent and 6.5 per cent.
This data however, points to a harsh reality. It means that the GDP will decrease sharply by five per cent in the 2021 fiscal. This indeed would be a huge fall and India will face a recession it has never ever experienced before.
Debate over financial stimulus announced
Finance Minister Nirmala Sitharaman has been for the past few days have been announcing packages and reforms for various industries. This is being seen as a boost to the economy. Sitharaman’s declarations came after Prime Minister Narendra announced Tuesday last an economic stimulus package of Rs 20 lakh crore.
The prime minister claimed that the package is worth 10 per cent of the GDP. However, former Union Finance Minister P Chidambaram has contradicted Modi’s statement. He said Monday that the economic package announced is only worth Rs 1.86 lakh crore and 0.91% of the GDP.
During Lockdown 4.0 restrictions are being eased in certain sectors to boost economy. Construction work has started, similarly many states have started opening up industries. However, there are many who feel that this will not be sufficient to revive the Indian economy.
The reforms announced by the Indian government don’t seem to have impressed the Goldman economists much. In their note they have termed the reforms as ‘medium-term’. According to them, the measures announced will not have an immediate impact on Indian economy. They have also mentioned about the lack of initiatives by the Indian government to revive growth instantly.
Agencies