According to economists polled by Reuters, this FY, India’s economy will shrink in double-digit. This is the most contraction on record and the Modi government’s recent stimulus is not enough to significantly boost it.
After contracting a record 23.9% in the April-June quarter, the Indian economy was estimated to contract 10.4% and 5.0% in the third and fourth quarters, respectively and merely steady in the first three months of 2021.
Compared to contractions of 8.1% and 1.0%, respectively, and 3.0%growth forecast in August. And for the current fiscal year ending March 31, Asia’s 3rd-largest economy was foreseen to shrink 9.8%, more than the Reserve Bank of India’s latest 9.5% projection
COVID-19 pandemic has dealt a serious blow to India’s economy with over 7.6 million coronavirus infections. India has the second most affected patients in the world after the USA.
After contracting a record 23.9% in the April-June quarter, the Indian economy was estimated to contract 10.4% and 5.0% in the third and fourth quarters, respectively and merely steady in the first three months of 2021.
Earlier this month the Reserve Bank of India forecasted a gloomy economic future while keeping the interest rates unchanged to prevent rising inflation.
The government has removed most restrictions imposed in the primary stage of the COVID-19 on businesses to recover the economy. At the same time, the government announced another round of fiscal stimulus to boost demand by $10 billion last week.
Though leading economists in the country are pessimistic about this FY’s outlook. On Oct. 13-21 poll of 55 economists showed they were more doubtful about government plans to recover the economy.
Almost 90% of economists, 34 of 39, who responded to the poll said the latest government stimulus was not sufficient to boost the economy.
Sakshi Gupta, Senior Economist at HDFC Bank said, “While the measures introduced to push consumer spending and capital expenditure are innovative within the confines of fiscal prudence, they do little to move the needle significantly in terms of the growth outlook this (fiscal) year.”
And 26 of 55 economists say a contraction of 10% or more for the year is inevitable.
The poll marks the seventh consecutive downgrade to this year’s outlook and if confirmed, would be the weakest annual economic performance since records began six decades ago.
Despite higher inflation forecasts, economists think the central bank should be more worried about reviving growth than price pressures driven by supply-side disruptions and to cut interest rates next quarter.
