Economy: The most difficult period for India, people dependent on hope


Description: Rapidly increasing cases of corona virus have increased consumption and business activities are still under control. In such a situation, only a slight improvement will be seen in the beginning of 2021.

The Government of India announced an economic relief package of 20 lakh crores in May to give a boost to the economy. The Reserve Bank of India has also reduced interest rates by 115 basis points since March. This indicates that more steps need to be taken to save the economy from the bad effects on businesses and employment due to the epidemic.

In India, the corona virus is spreading faster than the rest of the world. More than 33 lakh people have been infected and more than 60 thousand have lost their lives. Due to Corona, in this country with the second most population, crores of people had to stay at their homes, while the employment of millions has been lost.

Prakash Sakpal, senior Asia economist at ING, told Reuters, “Even though this is the worst period of the crisis, the rapid spread of transition in this quarter shows that it is meaningless to expect improvement in the near future.”

He says, “The government’s macroeconomic policy is facing difficulties amid rising inflation and rising government spending. This means that there is nothing that can keep the economy from falling for the rest of the year.”

In the last quarter, business activity in most parts of the country came to a complete standstill due to the lockdown imposed to prevent the spread of the corona virus.

According to this poll conducted by 50 economists between August 18-27, during that time the Indian economy shrank by about 18.3 percent.

In the previous poll, it was expected to decrease by 20%, so the assessment of the latest poll is slightly better. But this is the worst rate since the mid-1990s (ever since official figures of quarters are being recorded).

The economy is projected to shrink by 8.1 percent in the current quarter and 1.0 percent in the next quarter. This situation is worse than the previous poll conducted on 29 July.

There is agreement among economists that the Reserve Bank can reduce its repo rate to 3.75 percent in the next quarter by reducing the base rate by 25 basis points. But 20 out of 51 economists predict that there will not be much interference from RBI this year.

When asked when India’s GDP will reach the pre-Corona state, 80 percent of economists (30 out of 36) said it could take more than a year. Nine of them said that it could take more than two years.

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