Coronavirus effect: India's GDP to lose steam from Q3, says Oxford Economics

Global forecasting firm Oxford Economics on Tuesday said it expects India's GDP growth to lose momentum from late third quarter (October-December) of the current fiscal as the push from the initial reopening fades. It further said India fares the worst in its Asia recovery scorecard, implying that the country will likely take the longest among major economies to converge to its pre-coronavirus growth level.

Oxford Economics, in a report titled 'India: A reopening gone wrong', said the central government's attempts to restart the economy are already running aground. "In our baseline, we expect GDP growth to lose momentum from late Q3 on, once the push from the initial reopening fades and, likely compounded by the ongoing pandemic and inadequate policy support, legacy economic headwinds re-assert themselves.

"The risk clearly is that proactive steps by regional governments, especially the richer ones, to stem the spread of the virus bring the tipping point forward," it said. According to Oxford Economics, early data suggests that the positive economic impact of the accelerated lockdown exit will be felt in June, with the effect reinforced by a global growth pick-up that has aided a recovery in exports.

"The outlook beyond that, however, has turned more worrisome. The reopening drive is already beginning to hit roadblocks, amid the surge in COVID-19 cases," it observed. It pointed out that new virus hotspots have emerged across the country since late June and, barring Delhi, no major region has had notable success in containing the virus.

"First, while we do see a high probability of restrictions being tightened anew, we do not expect them to match the stringency of the phase one of the nationwide lockdown that caused the maximum economic damage. "Second, the rural economy, which is leading the recovery so far, seems at a much lower risk of shutting down again compared to cities, and should help cushion the downside to domestic demand," it noted.

India's economic growth stood at 4.2 per cent in 2019-20. Growth projections for the current year by various global and domestic agencies indicate a sharp contraction, ranging from (-) 3.2 per cent to (-) 9.5 per cent. With a single-day increase of 47,703 COVID-19 cases, India's virus tally mounted to 14,83,156 on Tuesday, while the death toll rose to 33,425, according to the Union Health Ministry data. Recoveries surged to 9,52,743, pushing the recovery rate to 64.24 per cent.

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