India's economy in deep trouble: S&P Report

June 26, 2020 17:09

S&P Global Ratings said on Friday that Indian economy is in deep trouble with growth expected to contract by 5 per cent in the current financial year 2020-21. "India's economy is in deep trouble. Difficulties in containing the virus, an anemic policy response and underlying vulnerabilities -- especially across the financial sector -- are leading us to expect growth to fall by 5 per cent this fiscal year before rebounding in 2021," it said.

The pandemic remains the key driver of the country's prospects. "Even though lockdowns have eased in less populated areas, urban growth engines are still held back by rising infections, severe mitigation policies and consumer risk aversion."

A normal monsoon, low oil prices, and supportive external financial conditions will only partly offset these effects, said S&P's in a report titled 'Asia Pacific Losses Near $3 Trillion As Balance Sheet Recession Looms' authored by Shaun Roache and Vishrut Rana.

"We expect the Covid-19 pandemic to leave lasting scars on the Asia Pacific with the extraordinary measures needed to shore up economies leading to higher debt, weaker balance sheets, and less appetite for spending in the future," they wrote.

Investment is likely to stay sluggish, especially in the private sector. "Even if state-owned enterprises spend more, we still anticipate less productive capital, lower potential output and a permanent two to three per cent shrinkage of most economies compared to the pre-COVID trend. - ANI

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