NEW DELHI- Expectations for India’s economic growth are being revised sharply lower as a surge in people losing their jobs and defaulting on debt suggest a more halting recovery from the financial shock of the COVID-19 pandemic.
Economists are downgrading their estimates as a range of data — from the rate of cheques bouncing to the amount of mortgaged gold jewellery up for sale – shows the extent of the economic damage from a devastating”‘”‘”‘ second wave of the disease.
Some observers also fear the psychological blow from the virus disaster that ripped through India this year killing tens of thousands of people will leave consumer reluctant to spend.
India’s government is sticking with a forecast that the economy will grow 10.5 percent in the fiscal year that started on April 1, but on Tuesday State Bank of India – the country’s largest lender – slashed its growth forecast to 7.9 percent from 10.4 percent.
Several international banks such as Barclays and UBS have also cut back their predictions.
After a 7.3 percent contraction in 2020-21 – the sharpest ever recorded by India – the relatively muted recovery puts India at odds with countries like United States and China that are seeing a swift rebound as they emerge from the pandemic, and suggests deeper damage has been done to an economy worth around $2.9 trillion before the crisis hit.
The knock-on effects of sub-par growth on a rapidly developing economy like India could be significant.
“GDP growth of less than 10 percent will be a – I won’t use the word disaster, but it will not be very beautiful,” SBI’s Chief Economist Soumya Kanti Ghosh told Reuters after lowering his forecast.
The situation has exacerbated unemployment that touched a 12-month high of 11.9 percent in May from 7.97 percent in April, according to data from the Centre for Monitoring Indian Economy. Rural unemployment that normally hovers around 6-7 percent also hit double digit levels in May, according to the privately owned firm.
Last year, India announced a $266 billion package to support the economy during a strict nationwide lockdown to contain the first coronavirus wave. But this was largely liquidity support given to banks to boost company credit, with less than a tenth of the sum used for welfare programs for the poorest in the country. – Reuters
