Hong Kong: Economists are forecasting the Indian economy to shrink 0.4% in the year to March as a result of steps to contain the coronavirus pandemic, according to the latest survey by Bloomberg News.
The forecast has been slashed thrice since February and represents a sharp cut from the 1.7% expansion seen in April, according to the median of 19 economists surveyed between May 6 and 11. The economy had last contracted in 1980, when gross domestic product shrank 5.2%.
Economic activity in India came to a virtual standstill after Prime Minister Narendra Modi ordered a 21-day nationwide lockdown starting March 25 to stem the spread of the coronavirus. The shutdown has since been extended twice through May 17, with some relaxations to allow resumption of economic activity.
“There remains uncertainty with respect to the timeframe through which the lockdown may continue,” said Indranil Pan, chief economist at IDFC First Bank Ltd. “Significant areas of the country continue to see increases in infection numbers and opening up the country from the lockdown might not be seamless.”
Despite some businesses and factories allowed to resume operations, there’s a dearth of workers as many returned to their rural hometowns amid the lockdown.
Still, some see India’s economy avoiding a contraction on the back of consumption picking up once restrictions are lifted.
“For the entire fiscal 2021 we expect growth of 0.8%,” said Hugo Erken, senior economist at Rabobank International. “However, there is a possibility that India has to adopt a ‘social distancing economy’ in order to prevent re-emergence of the coronavirus.” – Bloomberg