The optimism in the economic recovery had faded to a great extent with the considerably increasing number of COVID cases and the subsequent lockdowns. World Bank on 20th August 2020 stated that India’s GDP will project a steep contraction for the current fiscal.
We expected a gradual economic recovery when lockdowns and restrictions were eased but our expectations are hammered by World bank by their statement regarding the steeper contraction of India’s GDP in this current fiscal year. The World Bank earlier estimated a 3.2 per cent decline in the economy but however, the exponentially increasing COVID-19 cases and the resultant restrictions have become a reason for faded optimism among all. A caution was given to India by World Bank against using its tariff policy to encourage and attract companies who want to shift their base from China to India.
The report of India Development Update, 2020, stated on banks giving warning regarding the credit risks of firms and households on which how they find it problematic to serve their interests and repayment responsibilities in this slowing economy. Although, the government is trying to infuse and allow the private players in the strategic sectors and is already looking towards disinvestment, the World Bank gave suggestions regarding full privatisation of some Public Sector Banks (PSB) and private capital injections in some other industries after the situation gets better.
The other suggestions given by the World Bank is about accelerating reforms in important areas like labour, land, skills, health and finance so that the country will have a major benefit and strength also will be easy to come out stronger from the effect of COVID-19 pandemic. The green shoots of economic retrieval began to surface as India came out of the lockdown in June, though, in the month of July, there were many indicators mirroring a contraction as cases started to increase.
In the meantime, as given the vagueness growing over the economy, the wide gap between the forecast of numerous rating agencies should not be ignored. The former chief statistician Pronob Sen according to his expertise stated it as 12.5 per cent, where ICRA expected it to be 9.5 per cent and India Ratings had shown a contraction of 5.3 per cent this fiscal. There are various conclusions and theories emerged according to the understanding of people in various expert fields but to be sure about anything is pretty difficult as of now.