If the economic downturn in the country continues for the long run due to the pandemic situation resulting in lockdown, it will adversely hit India’s external sectors such as capital account, trade, external debt, exchange rate, and FDI.
Last week it was highlighted in the SBI report that, “We should be careful of our external sector in 2020-21 as a prolonged period of growth slowdown is likely to adversely impact India’s external sector which currently is comfortably placed on account of subdued prices of crude oil in the international market”. “However, If oil prices continue to remain subdued in the international market and there is no volatility during the course of the financial year, India is probably going to end the current fiscal with current account surplus,” according to SBI Ecowrap report.
In 2016-17, the Gross Domestic Product (GDP) was 8.3 percent and it had a huge fall back to 4.2 percent in 2019-20. Because of COVID 19, the development of the economy might shrink up to least 9 percent from the financial year 2020 levels, and currently, the financial year 2021 median growth contraction is at 5 percent.
During the first week of lockdown, the country’s quarterly GDP growth fell to around 3.1 percent in the Q4 financial year 2020. The business optimism, the flow of new orders and industrial production had a drastic fall during the month of April and May. With the downfall of the economy, market, and various other things the country is facing its worst recession and heavy job loss from industries and massive layoffs from corporations, taking the unemployment rate to a record high level.
The lockdown had a downturn on the economy, businesses, industries, etc. Across the country and government has opened the lockdown in phases, which already lead to the number of cases to more than 2.5 lakhs in India. As per reports, the testing was conducted for less than 1 lakh samples per day till May 18. The government had decided to lift the restrictions and open malls, restaurants, etc. from Monday onwards, this is one of the reasons why the cases have started increasing at a much faster rate. New cases are expected to observe a sharp fall till the end of August.
