Covid-19 causes severe disruption to Indian economy, says World Bank - ET Retail

WASHINGTON: The World Bank on Sunday said the coronavirus outbreak has severely disrupted the Indian economy , magnifying pre-existing risks to its outlook. In its "South Asia Economic Update: Impact of Covid-19", 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. “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),” 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. And it is important to prevent bankruptcies especially of a small and medium sized enterprise,” Timmer said in response to a question. “In the longer run, this is really an opportunity to bring the Indian economy on sustainable path not just fiscally, but also socially,” he said. 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. 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. “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,” the World bank said.