As the first half of the current financial year gets over, the curve of active Covid cases seems to be flattening across the country. The second half is expected to witness brisk economic activity, though a second wave of the pandemic is not ruled out. Echoing the World Bank’s forecast for Indian economy, the RBI has said that the GDP is likely to contract by 9.5 per cent in the ongoing fiscal. The massive downturn was a foregone conclusion after India imposed the world’s most stringent lockdown in late March in a bid to contain the virus, bringing economic operations to a grinding halt and wreaking havoc on millions of livelihoods. The economy contracted by a record 23.9 per cent in the April-June quarter, during which nationwide restrictions were in place. Though unlocking has been in progress from July, the adverse impact of the lockdown is still being felt, and the government has been slow in rising to the challenge.
On the bright side, the World Bank expects India’s growth to rebound to 5.4 per cent in the next fiscal. The RBI is hopeful that the GDP could turn positive at 0.5 per cent as early as January-March 2021. With positive growth being merely wishful thinking as of now, the government would have to act decisively — and quickly — just to keep the contraction below 10 per cent. Ironically, agriculture, the only sector that bucked the negative trend during April-June, finds itself at the crossroads amid the farmers’ widespread protests against the new laws. The Centre needs to resolve the issues flagged by the farming community on priority so that agriculture and allied activities can lead economic revival by boosting rural demand.
The upcoming festival season could prove to be a double-edged sword — spurring consumption on the one hand and heightening the risk of infection due to increased public movement on the other. It’s here that a major stimulus is required to sustain the gains. The
Rs 1 lakh crore liquidity chest for banks is not enough. According to the RBI, private investment and exports are likely to remain subdued. The sooner India offsets the damage caused by Covid, the easier it will be to restore investor/buyer confidence.