A Massive Coronavirus Recession is Coming. Can India Really Escape It?


A Massive Coronavirus Recession is Coming. Can India Really Escape It?

Illustration: Aishwarya Nayak

With entire countries under lockdown, factories shut and trade halted, the impact of the coronavirus on the world economy is expected to be devastating. According to a latest report by the United Nations Conference on Trade and Development (UNCTAD), “The world economy will go into recession this year with a predicted loss of global income in trillions of dollars. This will spell serious trouble for developing countries, with the likely exception of China and the possible exception of India.”

The report, however, did not give a detailed explanation as to why and how India and China will be the exceptions as the world faces a recession and loss in global income that will impact developing countries.

Last week, IMF chief Kristalina Georgieva had declared that “we have clearly entered a recession” and added that the Covid-19 pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, which have suffered an exodus of capital of over $83 billion in recent weeks.

Meanwhile, analysts have predicted a bleak FY21 for India, with the economy expected to slow down sharply due to virtually no revenue for months and expectations of soft consumer demand even once the crisis is over, because of bankruptcies and job losses.

S&P has further slashed India’s growth forecast to 3.5 per cent for the coming fiscal year from a previous downgrade to 5.2 per cent. The report said that it expects the damages to the economy from the pandemic to be as severe as the one during the Asian financial crisis of 1997-98.

Moody’s sharply slashed its estimated GDP projection for India for the year 2020 from 5.3 per cent to 2.5 per cent.

Crisil has cut India’s FY21 GDP estimates to 3.5 per cent from 5.2 per cent.

Nomura has estimated that India’s GDP will contract by 0.5 per cent in 2020, due to the coronavirus pandemic.

ICRA predicts India’s growth for FY21 at two perc ent.

Bleak projections have been made by other institutions as well, with a State Bank of India report claiming India’s growth could be the lowest in three decades, with the lockdown costing ₹8 lakh crore.

While the projections slightly differ from one other, there is unanimous agreement that stressful times lie ahead, for financial institutions as well as the world economy.