FINMIN: GROWTH DEPENDS ON INTESITY OF COVID-19
NEW DELHI:
Expressing 'cautious optimism' about the country's economic prospects, a Finance Ministry report on Wednesday said actual GDP growth in 2020-21 would be contingent upon the intensity, spread and duration of the COVID-19 pandemic.
The report, prepared by the Economic Affairs Division of the Finance Ministry, took comfort from an IMF note which projected a growth rate of 1.9 per cent for the current fiscal.
However, it added, "Government is cognizant of the relative severity of lockdown on economic activity in the country and is cautiously optimistic about the signals from Indian benchmark equity indices." Observing that these are still early days and COVID19 is yet to abate, the report said "the country's actual GDP growth in FY 2020-21 will be contingent upon the intensity, spread and duration of the COVID-19 pandemic within national territory." The report further said that downside risks to India's growth emerge from the high possibility of global slowdown deepening and supply chain disruptions getting exacerbated due to prolonged spread of COVID-19 and lockdowns across countries.
India, it added, continues to tackle the health crisis unleashed by the COVID-19 pandemic and the focus has now shifted to revive the economy which has been debilitated by the lockdown.
The government and the RBI are working towards implementing substantial targeted fiscal and monetary measures to support affected sectors of the economy, it said.
Prolonged spread of the deadly coronavirus and the subsequent lockdown resulting in deepening of the slowdown in global growth has emerged as a major downside risk to India's GDP growth projections in 2020-21, finance ministry said.
The macroeconomic report, released for the month of April, said that India's GDP growth for the current financial year is contingent on the intensity, the spread and the duration of COVID-19, that has claimed over 3,300 lives in India out of the total 106,750 cases reported so far.
Thus, the government is "cautiously optimistic" about the revival of growth in later part of 2020-21.
Most economists have projected India's GDP growth to contract in the current financial year with Goldman Sachs estimating a contraction of 45% in Apr-Jun itself. Chief Economic Adviser Krishnamurthy Subrmanaian, though, has pegged the GDP growth at 1.5-2.0% for 2020-21.
On the external front, the finance ministry expects a small current account surplus in Apr-Jun as the lockdown led to a sharp fall in economic activity that curtailed imports in March and April.