Coronavirus damps Indian hopes of Economic upturn
* Current Situation and Future Growth
India’s effort to recover from the most severe economic slowdown in years is being hampered as the coronavirus weighs on growth, disrupts industry and the disease starts to spread within the country. Until recently, India was the world’s fastest-growing large economy. But growth has tumbled in the past two years, reaching a six-year low of 4.7 per cent in the last quarter of 2019, according to revised data from the national statistics office.
“The most worrying aspect of the new data is that the latest numbers show little sign of the slowdown abating,” said Shilan Shah, a senior economist at Capital Economics.
The OECD (Organization for Economic Cooperation and Development) on Monday estimated that India’s gross domestic product would grow at 5.1 per cent in the 12 months to March, down from its previous estimate of around 6 per cent.
Several multinational agencies, including the World Bank and the International Monetary Fund, have drastically cut their India GDP growth forecasts for 2020-21 after economic activity in the country halted due to the 40 day coronavirus lockdown. While the World Bank expects India to grow at 1.5 – 2.8 percent in 2020, the IMF predicts a 1.9 percent expansion.
Also Fitch(American credit rating agency) trimmed its growth estimate for the same period to 4.9 per cent from 5.1 per cent. India’s economy is less integrated with China than those of many of its Asian neighbours, which analysts say has helped limit the immediate pain. But China is a vital supplier to large industries such as car manufacturing and pharmaceuticals, which are starting to feel the pinch.
India sources more than 70 per cent of pharmaceutical ingredients, around a quarter of car parts and the bulk of supplies for electronics from China. Many businesses say supplies are running low.
* What government is doing for it?
- Prime Minister Narendra Modi assessed the novel coronavirus’ impact on Indian economy and the possibility of a second stimulus package to boost sectors hit hard by the pandemic.
- During his meeting with Finance Minister Nirmala Sitharaman, PM Modi held detailed discussions on the state of the economy. Resource mobilisation for taking on future challenges was also highlighted.
- The government has constituted n empowered group – headed by Economic affairs Secretary Atanu Chakraborty – to suggest measures which can bring the economy back on track quickly post the lockdown. It has also been asked to work on relief and welfare mesures for various sectors of the economy as well as for the poor and needy.
- The government has put in place restrictions on expenditures in a bid to save resources. Funds are being diverted towards the fight against Covid-19. Besides, the Union Cabinet has approved a 30 percent cut in salaries and allowances of Members of Parliament for one year. The President of India, Vice President and state governors have voluntarily decided to take a pay cut as a gesture towards concerted efforts to contain the pandemic.
- The government at the same time has decided to suspend Members of Parliament Local Area Development Scheme and funds would be directed towards improving medical infrastructure. A member of Parliament gets Rs 5 crore every year as part of the MPLADS scheme.
* India needs a big stimulus package, says Abhijit Banerjee
Noble laureate Abhijit Banerjee said in a conversation with former Congress President Rahul Gandhi on Tuesday that India needs a large enough stimulus package to increase spending and and revive demand to face the challenge posed by the COVID-19 pandemic.