As India contemplates an exit strategy from the national closure, Swiss bank UBS projected that the country’s economy will contract 3.1% if mobility restrictions remain in place until the end of June and economic activity returns to normal in late August.
However, for the baseline scenario, assuming that current mobility restrictions are lifted in mid-May and that economic activity returns to normal by the end of June, growth is projected to slow to -0.4% in the financial year 21, moving its previous estimate of 2.5% down into negative growth territory.
“The challenges for India v/s its peers are more pronounced if infections spread rapidly considering India’s higher population density per capita, weaker health infrastructure and limited resources for intensive testing,” UBS said in the Economic Outlook report. from India.
Under a third scenario in which the coronavirus continues to spread, possibly in waves, until mid-2021, UBS said the economy could shrink by as much as -4.2% in financial year 21. “Any increase in cases after the uprising of the restrictions would lead to restrictions being imposed again. That said, we assume that the restrictions would be more selective in areas where infected cases are higher compared to a one-size-fits-all approach for India, “he added.
India has recently announced some relaxation in its lockdown for green and orange zone, allowing the resumption of agriculture and limited manufacturing, transportation etc. Rating agency Moody’s Investors Service cut its 2020 growth forecast for India to 0.2% from 2.5% previously, as the economic costs of the virus crisis amid the global economy shutdown are rapidly accumulating . Fitch Ratings warned that any deterioration in India’s fiscal outlook as a result of slower growth could put pressure on its sovereign rating.