India’s central bank predicts growth slump by 9.5% this year

Posted on Oct 9, 2020 at 3:58 pmUpdated October 9, 2020, 4:30 p.m.

“The tide is turning, suggesting that it is not unwise to dream of better days even in the darkest of times”That’s what Shaktikanta Das said in a video conference on Friday. The Governor of the Reserve Bank of India (RBI) tried to be optimistic in his poetic impulses. But the numbers published are worrying.

For the 2020-2021 financial year, the RBI’s growth forecast envisages a GDP shrinkage of 9.5%. The forecasts of the Indian central bank line up with those of the World Bank (-9.6%) and rating agencies such as Fitch (-10.5%). Goldman Sachs is even forecasting a drop of … 14.8%.

The worst is over

According to the Indian central bank, the worst decline of the first quarter, in which the economy slumped 23.9%, is over. “In less than a second wave, India is on the verge of losing the deadly grip of the virus and renewing its pre-Covid growth path.”said the governor of the RBI. The coronavirus has infected almost 7 million people in India since the beginning of the pandemic, killing more than 100,000 of them. If the virus continues to rage, some experts believe that its progression may slow down.

Over 20 million jobs lost

But this pandemic is already devastating for the most vulnerable. Around 400 million workers in the informal sector are at risk of further impoverishment, the International Labor Organization (ILO) warned in April. According to the World Bank, up to 115 million people worldwide could find themselves in extreme poverty this year. The fragile Indian middle class, once the growth engine of the South Asian giant, is also threatened. Between April and August, 21 million paid jobs were lost in India, according to the Center for Monitoring the Indian Economy.

Great freedom of action for modes

Despite this weak economic performance, Indian Prime Minister Narendra Modi has so far been politically spared. “He continues to enjoy the trust of large parts of the electorate”says Asim Ali, a researcher at the New Delhi Policy Research Center. Modi convinced the people that he was taking drastic and politically difficult measures for their safety, which favored his image as a strong man and encouraged the indulgence of the population.the analyst continues, who believes the prime minister still has a lot of room for maneuver.