The Indian economy was already slowing due to persistent financial sector weaknesses the World Bank report said.
New Delhi| The coronavirus outbreak has critically disrupted the Indian economy, magnifying pre-existing risks to its outlook, the World Bank said on Sunday.
COVID-19 to hit South Asia very hard, likely to wipe out gains made in poverty alleviation, the World Bank said in its “South Asia Economic Update: Impact of COVID-19
The World Bank expected the Indian economy to decelerate to 5 per cent in 2020 and predicted a sharp growth deceleration in fiscal 2021 to 2.8 per cent in a baseline situation.
The deadly & highly infectious novel coronavirus outbreak came at a time when the Indian economy was already slowing due to persistent financial sector weaknesses, the World Bank report said.
The government of India imposed a ‘lockdown’ with restrictions on the mobility of goods and people to contain the spread of the virus.
“The resulting domestic supply and demand disruptions (on the back of weak external demand) are expected to result in a sharp growth deceleration in FY21 to 2.8 per cent in a baseline outline (an estimation subject to wide confidence intervals),” the report said, adding that the services sector will be especially affected.
An improvement in domestic investment is expected to be delayed due to enhanced risk aversion on a global scale and renewed concerns about financial sector flexibility.
“Growth is anticipated to rebound to 5.0 % in fiscal 2022 as the impact of COVID-19 dissipates, and fiscal and monetary policy support pays off with a lag,” the report said.
The World Bank Chief Economist for South Asia Hans Timmer said India’s “outlook is not good,” in a conference call with reporters.
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And if the nationwide lockdown is prolonged, then the economic impact can be much worse than what the World Bank has in its baseline range of forecasts.
The World Bank Chief said, among the steps that India can take to tackle this challenge, the first step is to focus on mitigating the spread of the virus and to ensure that everybody has food.
The World Bank is also working with India on two more operations, which is expected to be ready in a matter of weeks.
The additional operations involve employment, banking and micro, small and medium enterprise sector.
The deadly & highly infectious COVID-19 has so far infected 8,356 people in India. The death toll remains at 273 on Sunday. The union health ministry gave the information adding that around 909 new cases were reported in the last 24 hours, whereas 34 deaths were reported.
The new figures come a day after PM Narendra Modi held a video conference with 13 Chief Ministers on Saturday to discuss whether the 21-day lockdown should be extended. The majority of CM stressed that the lockdown should be extended until 30th April.
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