Indian economy slumps
EXPERTS PREDICT RECESSION BUT MODI IS CONFIDENT OF REVIVAL
INDIA’S economy grew at its slowest pace in at least two decades last quarter, government data showed last Friday (29), with warnings of far worse to come as it grapples with the fallout of the world’s largest coronavirus lockdown.
Asia’s third-largest economy expanded by just 3.1 per cent in the January-March period, which coincided with the first week of a months-long shutdown.
Annual growth was 4.2 per cent, its slowest pace since the 2008 global financial crisis. Estimates were “likely to undergo revision” due to a lack of available data following the lockdown, the finance ministry said. But the current quarter is expected to reflect a severe contraction as manufacturing, services and consumption came to a grinding halt.
The key services sector – which contributes 54 per cent of GDP – suffered a severe blow last month, with the purchasing managers index of activity experiencing its sharpest contraction since record-keeping began in 2005.
Top IT firms, including TCS, Infosys and Wipro, also reported weak earnings in the quarter as the pandemic dragged on demand from Western markets.
The lockdown is widely expected to plunge the country into recession, with Goldman Sachs predicting a 45 per cent contraction in the April-June quarter from the previous year. The central Reserve Bank of India has also warned of a downturn and slashed rates to spur lending.
Even before prime minister Narendra Modi announced a shutdown in late March, the economy was struggling to gain traction with sluggish growth, record unemployment and a flurry of bad loans making banks reluctant to lend.
Earlier last month, Modi announced a $266 billion (£ 212bn) package – 10 per cent of the country’s GDP – to revive the battered economy. But with migrant workers having fled home to their villages due to a lack of food and money, and factories struggling with labour shortages, few expect economic activity to pick up soon.
On Tuesday, (2), the prime minister said reforms undertaken during the lockdown will help India’s economy in the long run. “On the one hand, we have taken tough steps to fight the virus and on the other, we have taken care of the economy,” Modi said at an industry meet. “We have to save the lives of citizens and stabilis the economy and speed up growth.”
India could increase exports and create jobs in furniture, air-conditioning, leather and footwear sectors, he said.
The prime minister added: “There is a need to create products that are Made in India and Made for the World.”