Post COVID Lockdown, To talk about recession, we mean a half-year drop in demand. Recession is when an economy goes through a downward trend. It can be due to a setback of demand or a rise in unemployment.
But for big World economies today including India, the year 2020-21 might outgo demand loss due to the happening of pandemic coronavirus.
As per the Economic Survey 2019-2020, India was pegged to show a growth of 6 to 6.5% in 2020-21. With a sudden blow of coronavirus, we are now even short of life essentials and are in a position to dive into a recession in 2021.
According to a domestic agency ICRA (Investment Information and Credit Rating Agency), restrictions placed due to lockdown on commercial activities will lead only a 2% rise in the overall economic growth in 2020, which was expected to rise at a rate of 4.5% to 5% earlier.
While an accurate estimation of Indian economic growth varies as the severity and prevalence of outbreak in different sectors is still uncertain.
Will it be a definite recession in India in 2021?
Analysts have been downwardly revising growth estimates following the outbreak for a host of developed countries.
It depends, whether the virus spread is curbed before May 2020, or the manufacturing sector booms up its production to match the demand.
There is a feeling that situation of unemployment or an extensive slowdown in demand and production will prevail but an assured estimation of recession is not right.
Besides China and the US, which due to the widespread disease forced the closure of their businesses which has now opened an opportunity for India and other underdeveloped nations to bring impairment in demand, which can save these economies from getting decoupled.
Comparatively, if the combined effect of government intervention, policy measures, locked production of other countries, and impact of social distancing is taken, it is hard to predict where the Indian economy would be in growth figures or financial standing in the coming years but the hopes are high.
While China is expected to resume its business by the second quarter, the supply chain shall be going to enervate or get disturbed as there shall be an open race to capture the global value chains of business.
Can a sudden boom in the Indian economy a correct expectation?
This surrounds ambiguity for the Indian economy to pace up its growth by 2021. But it is also clear that with the lockdown at the World level as a measure to fight with a pandemic, the Indian economy has an opportunity to grab new levels of growth to scale its manufacturing business.
An argument is still there whether the Indian economy will be able to capture the upcoming demand since there is a complete lockdown that might have a chance to expand and enhance.
The only convincing fact of the situation is that due to India’s labor size we still hold competitiveness in the market being coupled with India as innovative capabilities.
It is a fact that it will not be impulsive for an underdeveloped economy like India to supersede a market like China where the country is itself dependent on the Chinese market for imports. Also, in terms of exports, China caps for the third largest export partner of India but this doesn’t mean that the possibility of good results is less.
The overall impact of the outbreak gives a clear picture that India is the least affected compared to other giants and the way India is exporting necessities to the world around during this tough time there is surely going to be an unprecedented social impact on the world economy.
If better looked from the aspect of half-filled glass than half-empty glass, Indian economy would be a slight beneficiary of the crisis, as multinationals would now be forced to shift their supply chains of the Chinese market and India will be benefitted from this development and might bring in opportunities of growth
In the scenario, if India is able to defeat the virus before others, it can grab the chance of becoming the next global leader in manufacturing, where our value chains will be built overnight.
It will take time to qualify the current value chain demands but on becoming first-mover out of the crisis, India can significantly move ahead of the global market where others would be requiring more time to rebuild their manufacturing hubs.
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