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Long after the corona pandemic ebbs, India would be among the world's major economies feeling the cascading effects of the outbreak, according to Global forecasting firm Oxford Economics.

In a research note, it said India's post-COVID-19 scars could be among the worst in the world. "We forecast India's growth equilibrium to worsen substantially over the medium term, with potential growth averaging just 4.5 per cent over 2020-2025 in our latest baseline, as opposed to our pre-virus forecast of 6.5 per cent," Oxford Economics said.

‘‘It's likely that headwinds already hampering growth prior to 2020 -- such as stressed corporate balance sheets, elevated non-performing assets of banks, the fallout in non-bank financial companies, and labour market weakness -- will worsen," writes Priyanka Kishore, head of economics for South Asia and South-East Asia, in the report.

However, an adequate and well-designed fiscal stimulus would halve this impact by limiting deterioration in pre-COVID-19 headwinds.

The report notes that the Indian government has announced various schemes and reforms this year, with an eye on the medium-to-long-term growth.

"However, its policy implementation track record is mixed and is likely to have been weakened further by recent social and institutional developments that detract from its capacity to focus on economic policymaking," the global forecasting firm said.

Nonetheless, beyond 2020, the firm said India remains one of the most rapidly growing economies in its baseline.

"But, that is not enough to preclude a large medium-term output loss in the wake of COVID-19," it warns. So, even after the pandemic is contained, India's economy will have to deal with its aftermath.

Oxford Economics said that despite having one of the most stringent lockdowns globally, India's direct fiscal response to COVID-19 so far amounts to just 2.5 per cent of the GDP, with the lion's share of the USD 230-billion fiscal package earmarked for liquidity and financing support schemes.

"While we forecast that the central government's fiscal deficit will widen to 7 per cent of GDP (gross domestic product) in 2020-21 from 4.7 per cent in 2019-20, it's unlikely to deliver a meaningful boost to growth because it's not the result of a surge in spending," it argued. Oxford Economics said it expects private investment to continue to be held back by both macroeconomic and financial factors.

Meanwhile, Moody's Investors Service on Thursday upped India's growth forecast to -10.6 per cent for the current fiscal, from its earlier estimate of -11.5 per cent. It said the latest stimulus prioritises manufacturing and job creation, and shifts focus to longer-term growth.

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