DMPQ-“Covid-19 pandemic has hit India’s economy hard.” Discuss.

The current and sharp rise in COVID-19 cases in India is proving to be an immediate threat to India’s FY22 growth prospects. The economic challenges are set to become tougher if this second wave is not brought under control quickly. The longer the second wave lasts, the more severe would be the adverse impact on the Indian economy. There will be a race between the pace of COVID-19 vaccination vis-à-vis. the speed at which COVID-19 and its new mutants spread.

In the first week of April 2021, both the RBI and the IMF provided their latest assessments on India’s growth prospects for FY22. The RBI has pegged India’s real GDP growth at 10.5% whereas the IMF has revised its earlier forecast upwards, pegging India’s growth at 12.5%, which is 2% points higher than the RBI’s forecast. The RBI may be concerned relatively more with the adverse impact of the second COVID-19 wave sweeping almost the whole of India at present. These historically high real GDP growth rates mainly reflect a strong base effect following the contraction of (-)8.0% in FY21. India’s projected growth of 12.5% in FY22 is noticeably higher than other major economies of the world, with China at the second position estimated to show a growth rate of 8.4%. These growth projections may come under severe challenge if the current second wave of COVID-19 is not brought under control quickly. Much would depend on the pace at which India’s population at large, gets vaccinated. In the meanwhile, indications are that the projected recovery in 1QFY22 may be curtailed due to the debilitating impact that COVID-19’s second wave is currently having on the Indian economy. Major economic and urban agglomerations are already reeling under its impact with partial and localized lockdowns with widening coverage by the day.

 

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