World’s 3rd biggest economy suffers first slump in decades

World's 3rd biggest economy suffers first slump in decades
India suffers 1st collapse in decades, Source: Web

India, the third biggest Asian economy, has rushed into the collapse for the 1st time in around a quarter of a century because the Coronavirus pandemic is still having hype in India, and analysts showed the fear that the territory will struggle to revive from that recession.

 On Friday, official statistics published that described GDP (Gross Domestic Product) for the Jul-Sep quarter cut down to 7.5 percent when compared to the last year’s same period, the 1st quarter of the country’s fiscal year.

On Friday, in a statement, the Indian Ministry of Statistics described that with a view to getting the blowout of the Coronavirus pandemic, measures were implemented on the economic actions not deemed important during the 1st quarter. The ministry continued that though the limitations have been slowly lifted, there has been a significant effect on economic activities.

Services sector faced a double-digit decline for the second time

Shilan Shah, the senior Indian economist at Capital Economics, said that while manufacturing returned to growth, the services division faced a 2nd consecutive double-digit cut. Moreover, he added that government consumption even cut down quickly in part because of the inadequate economic response to the difficulties.

Shilan Shah continued that positive preliminary outcomes from AstraZeneca on its COVID-19 vaccine is an excellent update for India, given that it acquired one of the biggest orders of any country, and the Coronavirus vaccine will be manufactured locally.

The world's 3rd biggest economy faces 1st recession in decades
India faced first economic collapse in decades,
Source: Web

In a research note, he explained that the COVID-19 vaccine is the most prompting sign yet that India has a way to ending its Coronavirus epidemic and the social distancing that is still continue to weigh on the country’s economy.

But delivery difficulties could mean the Coronavirus vaccine would not be broadly available until the 2nd half of the upcoming year, said Priyanka Kishore (South East Asia analysts at Oxford Economics). Besides this, there are also a few challenges that the absence of clarity according to data from the Coronavirus vaccine trials could postpone regulatory authorization.

Both official economists described that the country’s economy has a challenging path forward. Plus, Kishore said that the lack of a comprehensive fiscal response, will hinder growth going forward. Investors will be closely monitoring as the central bank of India meets in the upcoming week.

Shilan Shah said that under these situations, fiscal policy is probably to remain very loose for the foreseeable future, and they think markets are too aggressive in expecting modest rate climbs in 2022.