India’s economy has already shown a slow down as real GDP decelerates to its lowest in over six years in the third quarter 2019-2021, and the outbreak of COVID-19 has even hit hard to the Indian economy and emerged as a new challenge to grow. The total country lockdown to contain the widespread of coronavirus has brought economic activity to a standstill leading to a brake on both consumption and investment. On 12th April, the World Bank stated that the coronavirus outbreak has severely disrupted the Indian economy and anticipated the Indian economy to decelerate to 5% in 2020 according to its South Asia economic update. The World Bank in its South Asia Economic Focus report said India’s economy is expected to grow 1.5% to 2.8% in 2020-2021 fiscal.
The World Bank is working closely with India to mitigate the COVID-19 crisis. World Bank has approved USD 1 billion grant to India to deal with the noble COVID-19 pandemic. The first tranche has already been released to deal with the emergency in the healthcare sector. It will help in providing diagnostic equipment, and testing of coronavirus for the entire population. The World Bank President for south Asia Hartwig Schafer said that India’s first priority should be to protect their people, especially the poorest who face considerable worse health and economic outcomes.
“Given significant uncertainties, there is a wide confidence interval around the baseline estimate. If a large-scale domestic contagion scenario is avoided, early policy measures pay off, and restriction to the mobility of goods and people can be lifted swiftly, an upside scenario could materialize in FY2021, with the growth around four percent,” Hartwig Schafer said.
“However, if domestic contagion is not contained, and the nationwide shutdown is extended, growth projections could be revised downwards to 1.5%, and fiscal slippages would be large,” Hartwig Schafer said.
“Once lockdown restrictions are loosened, South Asian governments should adopt expansionary fiscal policies combined with the monetary stimulus to keep credit flowing in their economy,” he said.
