The Indian economy is facing a resilience test given the risks posed by the coronavirus

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The resilience of the Indian economy is being tested by its ability to weather a devastating Covid-19 outbreak, although no one has yet doubts its potential to achieve the world’s fastest rate of growth among major economies this year.

The economy is well on its way to growing 10% in the year beginning April 1st. This comes from the median of 12 estimates compiled by Bloomberg News. This came after several economists downgraded their forecasts in recent weeks to take into account local activity restrictions, including India’s political and commercial centers.

However, the downgrades are a message that the recovery of the economy does not take for granted. Economists say the easing of interstate restrictions will determine the strength of the recovery, while consumer willingness to spend – as it was last year when the lockdown restrictions were lifted – will also be crucial.

It was pent-up demand for everything from cell phones to cars that fueled consumption in Asia’s third largest economy when it reopened last year after one of the toughest lockdowns that lasted more than two months. Data released later Monday will likely show that gross domestic product grew 0.9% in the three months to March. This is the second quarter in a row since India left a rare recession.

What Bloomberg Economics Says …

“The expansion of state-level lockdowns last month now carries significant downside risks to our latest growth forecast.”

Abhishek Gupta, Indian economist

Even if virus numbers have declined and some parts of the country could be open again by June, given economic uncertainties and unemployment at its highest level in a year, consumers are unlikely to spend freely.

Households would rather save than spend, said QuantEco Research economist Yuvika Singhal, who has downgraded its full-year growth forecast by 150 basis points to 10%.

The biggest success of the second wave of Covid infections was demand with a loss of mobility, discretionary spending and employment, the Reserve Bank of India said earlier this month. The central bank, which will review rates later this week, has kept monetary policy loose and added liquidity to the system to support growth.

“Even as India’s second wave of Covid-19 wears off, the underlying economic toll now appears to be higher than expected,” said Barclays economist Rahul Bajoria. “

If the country is hit by a third wave of infections, as some experts warn, economic costs could rise further, bringing growth down to 7.7%, Bajoria said.

This story was published by a wire agency feed with no changes to the text. Only the heading was changed.

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