The Indian economy is likely to rebound in the second half of 2020 as the impact of the COVID-19 pandemic recedes, and is projected to grow by 6.7 per cent in the next financial year, IHS Markit said on Thursday.
The pandemic resulted in severe disruptions in industrial production and consumption spending in India during April and May.
“The severe negative impact is expected to result in a significant contraction in GDP in the April-June quarter of 2020, resulting in a recession in the 2020-21 financial year with GDP expected to contract by 6.3 per cent year-on-year,” it said in its outlook on the Indian economy.
However, as lockdown conditions have been progressively eased, early signs of recovery were evident in the most recent economic data.
The IHS Markit Purchasing Managers’ surveys for India showed that economic momentum improved in June, reflecting the easing of COVID-19 related restrictions during May and June.
India imposed a total lockdown beginning March 25 and restrictions were eased from May. “IHS Markit forecast that the Indian economy will rebound as the impact of the pandemic recedes, with improving economic growth momentum in the second half of 2020 and positive GDP growth of 6.7 per cent in the 2021-22 financial year,” said Rajiv Biswas, Asia Pacific Chief Economist at IHS Markit.
Despite the negative short-term shocks from the pandemic, total foreign direct investment into India has remained buoyant. Foreign direct investment by technology firms in the first seven months of 2020 has already reached around USD 17 billion, boosted by the USD 10 billion new investment announced by Google in mid-July.