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Analysts predict COVID-19 will significantly impact the Indian economy


Analysts predict COVID-19 will significantly impact the Indian economy
SHARES

The Central Government has offered guidelines to be followed during the nationwide lockdown which will be extended until May 3. It’s no secret that the economy doesn’t quite function when a full lockdown is imposed, so how is India doing in the midst of all this? Not very well. 

A note published by Barclays Research suggests that India will lose $26 billion per week due to the loss of output during the lockdown. On March 24, Barclays had predicted a loss of $16.6 billion per week. The new estimate is a consequence of the extended lockdown which was announced by the PM during his national address on April 14. It’s worth mentioning that the Barclays estimate is based on the assumption that the lockdown will continue until early June.

“We think a precautionary increase in savings and reduction in discretionary consumption, especially on travel and recreational services, will weigh on growth rates longer. This drives the downward revision in our growth recovery outlook to show a shallower pick-up in Q3,” Barclays Research said in its note.

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As a result of these predictions, Barclays has estimated zero GDP (Gross Domestic Product) growth for the year. Additionally, the research firm mentions that the country could see losses of up to $234.4 billion or 8.1% of the national GDP. 

A senior economist who chose to remain anonymous said - “The estimates that suggest a negative GDP growth are arrived by just linear assumptions. There are many moving parts. Public spending and its multiplier effect is one of them.”

Economists have also mentioned that the economy will not magically recover when the lockdown is lifted. This is primarily due to the fact that many will be unwilling to walk into crowded places, especially in metropolitan areas like Mumbai and Delhi where the impact of COVID-19 has been the worst. Other factors could include social distancing norms, which will likely continue even beyond the lockdown. 

The lockdown has resulted in factories running at lower capacities than usual, while customers’ spending power has also decreased due to lay-offs, salary cuts, and a number of other factors.

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