<p class="bodytext">The World Bank on Wednesday said that it is likely to project a steeper contraction of India’s economy than 3.2% it has forecast for the current financial year 2020-21 due to the increasing number of Covid-19 cases and the resultant regional lockdowns.</p>.<p class="bodytext">“The impact of Covid-19 on the economy has come in two phases. Initially, the main economic impacts of Covid-19 were due to supply disruptions from China, and concentrated in activities such as tourism, aviation, and other services. Thereafter, as the virus spread across the world, denting the economic outlook and impairing investor sentiment, it further impacted growth, investment, exports, and remittances,” the World Bank said in its latest report.</p>.<p class="bodytext">India implemented stringent lockdown and social distancing measures to curb the spread of the Covid-19 pandemic, resulting in a quasi-standstill in economic activity in the first two months of the current fiscal year. The lockdown period is likely to have adversely impacted the balance sheets of households and firms.</p>.<p class="bodytext">Social distancing provisions of varying stringency will probably need to remain in place even beyond the lockdown period. Furthermore, even after the lockdown is lifted, businesses will incur fixed and variable costs to adhere to new safety, hygiene, and social distancing norms. This would test the viability of businesses. Another issue that may emerge is the availability of migrant workers to work in urban centres after a large number of them returned home.</p>.<p class="bodytext">These mutually reinforcing disruptions in domestic supply and demand are expected to result in a growth contraction in the current financial year and the recovery is expected to be gradual thereafter, the Bank said. “Acknowledging considerable margins of uncertainty around any point estimate projection, using information available until the end of May 1, we projected that the economy will contract in FY20/21 by over 3% and the rebound will be muted in FY21/22 in spite of the significant base effect.”</p>.<p class="bodytext">“In the current, rapidly evolving context, these projections are likely to be revised as new information is incorporated, especially as the daily number of cases continues to increase resulting in several states and districts re-imposing lockdowns; and available high frequency indicators show that the economy has not yet reverted to baseline,” said the report.</p>
<p class="bodytext">The World Bank on Wednesday said that it is likely to project a steeper contraction of India’s economy than 3.2% it has forecast for the current financial year 2020-21 due to the increasing number of Covid-19 cases and the resultant regional lockdowns.</p>.<p class="bodytext">“The impact of Covid-19 on the economy has come in two phases. Initially, the main economic impacts of Covid-19 were due to supply disruptions from China, and concentrated in activities such as tourism, aviation, and other services. Thereafter, as the virus spread across the world, denting the economic outlook and impairing investor sentiment, it further impacted growth, investment, exports, and remittances,” the World Bank said in its latest report.</p>.<p class="bodytext">India implemented stringent lockdown and social distancing measures to curb the spread of the Covid-19 pandemic, resulting in a quasi-standstill in economic activity in the first two months of the current fiscal year. The lockdown period is likely to have adversely impacted the balance sheets of households and firms.</p>.<p class="bodytext">Social distancing provisions of varying stringency will probably need to remain in place even beyond the lockdown period. Furthermore, even after the lockdown is lifted, businesses will incur fixed and variable costs to adhere to new safety, hygiene, and social distancing norms. This would test the viability of businesses. Another issue that may emerge is the availability of migrant workers to work in urban centres after a large number of them returned home.</p>.<p class="bodytext">These mutually reinforcing disruptions in domestic supply and demand are expected to result in a growth contraction in the current financial year and the recovery is expected to be gradual thereafter, the Bank said. “Acknowledging considerable margins of uncertainty around any point estimate projection, using information available until the end of May 1, we projected that the economy will contract in FY20/21 by over 3% and the rebound will be muted in FY21/22 in spite of the significant base effect.”</p>.<p class="bodytext">“In the current, rapidly evolving context, these projections are likely to be revised as new information is incorporated, especially as the daily number of cases continues to increase resulting in several states and districts re-imposing lockdowns; and available high frequency indicators show that the economy has not yet reverted to baseline,” said the report.</p>
