A three week lockdown in a nation of 1.3 billon people caused biggest crisis in a decade resulting in economic fall out, millions of job losses and starvation of the destitute. Presently, the threat to the global economy is high, which has affected manufacturing to a massive extent and led to a supply shock.
India’s GDP growth for the fiscal year 2019-2020 was estimated at 5 per cent and is likely to fall to 4.8 per cent for the current fiscal 2020-21, a UN report said and also warned amidst the corona pandemic, there would be a dramatic adverse impact on economy globally.
“Prior to the outbreak of COVID-19, the outlook for growth for 2020-21 was on the rise,” the central bank said. After analysing the Monetary Policy Report, RBI said that the outlook for the economic recovery has made the country more vigilant amidst corona virus outbreak and emphasized the long lasting impact on South Asia’s engine of growth.
A looming economic crisis has now remained the most pressing problem for the whole country. However, this is a potential opportunity to enact reforms to fill the current gap and attract foreign investment to the country says some financial analysts.
“It is said India reforms only in crisis,” Raghuram Rajan, the former governor of the Reserve bank of India, wrote in a LinkedIn post this week. “Hopefully, this otherwise unmitigated tragedy will help us see how weakened we have become as a society and will focus our politics on the critical economic and health care reforms we sorely need.”
India has a history of making effective reforms in crisis. For instance, in 1991-92, it unshackled the private sector from a multitude of government controls, deregulated financial markets, reduced import tariffs and paved way to more foreign investments to avoid a balance of payments crisis.