As per the report the Indian economy is likely to slip into recession in the third quarter of this fiscal. Due to the pandemic, loss in jobs will delay the recovery in consumer demand even in the post-pandemic.
According to Dun & Bradstreet’s latest Economic Observer, the country’s economic recovery will depend on the efficacy and duration of implementation of the government’s stimulus package.
Dun & Bradstreet India Chief Economist Arun Singh said that the effect of measures to recover the economy will depend on three key aspects i.e. the time taken for effecting the withdrawal of the lockdown, the efficiency of implementation and duration of execution of the measures announced.
Mr Singh stated that in the positive measures announced by the government, the majority directed towards strengthening the supply side of the Indian economy.
He further added that due to lack of cash in hand, demand for goods and services to remain depressed.
He further said that the banking sector might face struggle due to debt and bad loans.
“Therefore, even as authorities across the country announce several relaxations in the lockdown phase 4.0, it is highly likely that India might be close to registering a recession in the third quarter of the financial year,” Mr Singh said.
However, with the monetary stimulus, liquidity will inject, thus stimulates the demand. The report further noted the channelisation of funds from the financial institutions will be subjected to several constraints.
Mr Singh stated the increased risk averseness as the first concern. He added that the balance sheets of firms, households, and banks/NBFCs have weakened considerably. Low demand funds by firms as production activities have been on a standstill during the lockdown period.
Indian Economy Hammered Due To The Lockdown
The lockdown imposed by the government, affected the supply and demand, disrupting the economy.
Prime Minister Narendra Modi imposed a nationwide lockdown to control the spread of coronavirus on March 25. With some relaxations, the lockdown extended for three times. On May 31, the fourth phase of the lockdown will expire.