India unveils measures to boost Covid-hit economy
MANUFACTURING SECTOR TO GET £20 BILLION FUNDING AS RECESSION BITES
THE Indian government announced new measures to support the manufacturing sector and create jobs after the central bank said the country was set to enter a recession with estimates of another quarterly contraction.
Asia’s third-largest economy, which is home to 1.3 billion people, has seen its economy badly hit by the pandemic, with growth shrinking by a record 23.9 per cent between April and June.
“India has entered a technical recession in the first half of 202021 for the first time in its history,” the Reserve Bank of India (RBI) said in its report released last Wednesday (11).
The economy was estimated to contract by 8.6 per cent in the quarter ending September, resulting in a “technical recession”, which occurs with two consecutive quarters of negative growth, the RBI added.
The International Monetary Fund (IMF) said last month that
India’s economy would contract by 10.3 per cent for the year.
But finance minister Nirmala Sitharaman said last Thursday (12) the economy was now recovering strongly, pointing to global ratings agency Moody’s revision of India’s calendar year contraction to -8.9 per cent from its previous -9.6 per cent estimate.
“(It is) indicative of corrections happening in a positive direction,” she told reporters in New Delhi.
The RBI also added that the “contraction is ebbing with gradual normalisation in activities and expected to be short-lived”.
Even before prime minister Narendra Modi announced a
strict lockdown in late March, India’s economy was already sluggish after being weighed down by record unemployment and a flurry of bad loans that made banks reluctant to lend.
Sitharaman announced some $27 billion (£20.36bn) in fresh measures to support the manufacturing sector and create jobs. They include incentives to produce goods and services locally, as well as benefits for foreign firms that invest in Indian companies.
They come on top of the $266bn
(£201bn) package announced by Modi in May to revive the stuttering economy.
The official GDP figures for July-September will be published next Friday (27).
RBI economists, however, warned that households were still facing financial stress.
“Stress is intensifying among households and corporations that has been delayed but not mitigated, and could spill over into the financial sector,” they wrote in the report.