Indian Economy To Decelerate To 5% In 2020 Amid Coronavirus Outbreak: World Bank

The World Bank on Sunday said the coronavirus outbreak has severely disrupted the Indian economy, magnifying pre-existing risks to its outlook.

In its 바카라�South Asia Economic Update: Impact of COVID-19바카라�, the World Bank estimated the Indian economy to decelerate to 5 per cent in 2020 and projected a sharp growth deceleration in fiscal 2021 to 2.8 per cent in a baseline scenario.

The COVID-19 outbreak came at a time when India's economy was already slowing, due to persistent financial sector weaknesses, the report said. To contain it, the government imposed a 바카라�lockdown바카라� with restrictions on mobility of goods and people.

바카라�The resulting domestic supply and demand disruptions (on the back of weak external demand) are expected to result in a sharp growth deceleration in FY21 to 2.8 percent in a baseline scenario (an estimate subject to wide confidence intervals),바카라� the report said, adding that the services sector will be particularly impacted.

A revival in domestic investment is likely to be delayed given enhanced risk aversion on a global scale, and renewed concerns about financial sector resilience.

바카라�Growth is expected to rebound to 5.0 per cent in fiscal 2022 as the impact of COVID-19 dissipates, and fiscal and monetary policy support pays off with a lag,바카라� the report said.

In a conference call with reporters, World Bank Chief Economist for South Asia Hans Timmer said India바카라�s 바카라�outlook is not good.바카라�

And if the domestic lockdown is prolonged, then the economic result can be much worse than what the World Bank has in its baseline range of forecasts.

Among the steps that India can take to address this challenge, Timmer said the first step is to focus on mitigating the spread of the disease, and to make sure that everybody has food.

바카라�Then, it is very important to prepare for a rebound and that means there should be a focus on temporary jobs programmes, especially at the local levels. Those initiatives should be supported. And it is important to prevent bankruptcies especially of a small and medium sized enterprise,바카라� Timmer said in response to a question.

바카라�In the longer run, this is really an opportunity to bring the Indian economy on sustainable path not just fiscally, but also socially,바카라� he said.

The World Bank is working with India to mitigate the challenge posed by COVID-19. It has approved USD1 billion to India, of which the first tranche has already been released to deal with the emergency in the health care sector.

The first tranche aims at delivering civilian diagnostic equipment, put in place additional capacity to deal with testing and make testing available that benefits the entire population, said World Bank Vice President for South Asia Hartwig Schafer.

The World Bank is also working with India on two additional operations, which is anticipated to be ready in a matter of weeks.

These include, employment, banking and micro, small and medium enterprise sector.

In its report, the World Bank said that the COVID-19 outbreak has magnified pre-existing risks to India바카라�s economic outlook.

The government is undertaking measures to contain the health and economic fallout, and the RBI has begun providing calibrated support in the form of policy rate cuts and regulatory forbearance.

바카라�Given significant uncertainties, there is a wide confidence interval around the baseline estimate. If a large-scale domestic contagion scenario is avoided, early policy measures payoff, and restrictions to the mobility of goods and people can be lifted swiftly, an upside scenario could materialize in FY21, with growth around four per cent,바카라� it said.

바카라�However, if domestic contagion is not contained, and the nationwide shutdown is extended, growth projections could be revised downwards to 1.5 per cent, and fiscal slippages would be larger,바카라� the World bank said.