Covid-19 toll on Indian economy worsens, jobs crisis worsens: survey



BENGALURU: India’s economic outlook has weakened again, albeit slightly, with worst-case forecasts suggesting the toll from the coronavirus pandemic could be much higher, fueling fears that the jobs crisis could worsens over the coming year, according to a Reuters poll.
New restrictions aimed at curbing the current wave of coronavirus have crippled economic activity, leaving several million people unemployed and prompting economists – who have been broadly optimistic – to downgrade their views for the second time since At the beginning of April.
The May 20-27 poll showed that the outlook for the current quarter was lowered to 21.6% per year and 9.8% on average for this fiscal year, compared to 23.0% and 10.4% respectively. a month ago. The economy was forecast to grow 6.7% over the next fiscal year, compared to the 6.5% previously forecast.
As the consensus pointed to healthy growth figures later this year, the 29 economists, in response to a supplementary question, warned that the outlook was either “weak and subject to further declines” or “fragile, with a setback. limit”.
None expected a “strong recovery, followed by an upgrade”.
“The recovery in India was strong in the months leading up to the second wave. This leads us to believe that the recovery may rebound quickly after the number of new infections has declined. But immunization implementation needs to accelerate to have an effect this year, “said Wouter van Eijkelenburg, economist at Rabobank.
“Therefore, new outbreaks of the virus are hanging over salvage like the sword of Damocles. Until a large part of the population is vaccinated, there remains this downward risk of further waves and subsequent lockdowns hampering recovery. ”
Highlighting concerns that a slow rollout of the vaccine could have a bigger impact on the economy, the consensus showed that in the worst-case scenario, the economy would only average 6.8% growth this fiscal year after its shutdown. deepest recession last year.
“Hopefully (the situation) won’t go over there. If it does and we have another wave … after this one, maybe the government will learn some lessons – that it better to lock the economy down sooner than later, ”said Gareth Leather, senior economist for Asia at Capital Economics.
“The threat of further waves will weigh on the economic outlook as long as India’s immunization progress remains poor.”
India’s unemployment rate peaked nearly a year at 14.73% in the week ending May 23, according to the Indian Economic Monitoring Center (CMIE), reflecting the impact of the economic downturn.
When asked if there was a risk that the unemployment situation in India would worsen in the coming year, more than 85%, or 25 of 29 respondents, said it was high. , including four who said very high. The other four said the risk was low.
“There is going to be a significant demand shock to the economy, part of which could be a permanent destruction of demand, thus pushing further out of the job market and keeping the unemployment rate high over the year. coming soon, ”said Prakash Sakpal, senior economist for Asia. at ING.
The Reserve Bank of India has maintained its loose monetary policy, including several liquidity measures, and is expected to remain on an easy path for this fiscal year.
As calls have grown for more fiscal stimulus to accelerate economic recovery, the government has limited space to respond to the challenges posed by the health crisis.
“If the Indian government increases spending … it will likely avoid a loss of economic output in the short term, but at the same time it puts more pressure on long-term debt sustainability, essentially mortgaging their future,” said Eijkelenburg of Rabobank.
“India’s policymakers are between a rock and a hard place when it comes to decisions on additional fiscal stimulus.”



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