The size of the country’s economy will decrease by 8.6% in the second quarter of the current financial year due to the Corona pandemic. An RBI official said that the country is caught in a recession cycle for the first time with a fall in the Gross Domestic Product (GDP) in two consecutive quarters. The impact of the Covid-19 epidemic and lockdown saw a 23.9% decline in GDP in the first quarter.
The government has not released the second-quarter GDP figures, but researchers at the central bank have estimated using the forecast method that the GDP size will decline by 8.6% in the July-September quarter. Earlier, RBI had predicted a 9.5% decline in GDP in the current financial year.
The report prepared by Pankaj Kumar of the Central Bank’s Researcher and Monetary Policy Department said that India is technically caught in the economic downturn for the first time in its history in the first half of 2020-21.
The report, titled ‘Economic Performance Index’, states that economic contraction is forecast for the second consecutive quarter. However, it also states that activities are slowly normalizing, leading to a declining rate of GDP and that the situation is expected to improve.
Moody’s Raises Economic Growth Rate Estimate
Moody’s Investors Service has raised India’s economic growth forecast for the calendar year 2020 to (-) 8.9%. Earlier (-) 9.6% growth rate was estimated. The rating agency on Thursday raised its economic growth forecast for the calendar year 2021 to 8.6% from 8.1%.
Moody’s, raising India’s estimate, said the decline in new cases of infection is reducing traffic restrictions in the country. This is the reason why the economic activity is expected to accelerate further in the coming quarters.
However, the slowdown in lending facilities due to the weak financial sector will affect the improvement. In addition, the global economic growth rate will depend on how the epidemic is being controlled.