Indian economy is expected to bounce back from the Covid-19 pandemic induced crisis from the next financial year, believes State Bank of India chairman Dinesh Kumar Khara. As he said on Saturday, while addressing the virtual annual general meeting of Bengal Chamber of Commerce and Industry, the Indian economy has shown resilience to come out of a downturn caused by the pandemic.
According to the SBI chairman, there will be a paradigm shift that will result into the Indian Economy becoming more mature with its stakeholders learning to contain costs. Also, he believes, some changes in the Indian economy that will come in the post-pandemic situation will be permanent afterwards.
Khara also indicated that the Indian economy has shown some positive traction towards the end of the first quarter of the current financial year.
The corporate sector has been massively hit by the pandemic like several other segments. Investments in the sector took a major hit due to the economic crisis caused by the Coronavirus pandemic. The investment demand from the corporates would need some more time to pick up, believes Khara.
He also thinks that the corporate sector will become very careful about borrowings and use their internal resources initially taking learnings from the pandemic-induced situation. “Average capacity utilisation among the corporations is around 69%. Investment demand from corporations will take some time to pick up. The cash-rich PSUs will initially embark upon a capital expenditure plan which will generate investment demand,” said SBI chairman.
Despite the lockdown and the economic crisis, the core sectors of the Indian economy, including steel and cement industry have been doing well since the beginning of the current financial year and they are in a position to tap the export markets aiding the economy to revive, believes Khara. He also mentioned that the sectors like travel, tourism and hospitality are worst-hit in the wake of the pandemic.
Last month, in its ‘World Economic Outlook’ report, the International Monetary Fund (IMF) said the Indian economy would contract by a massive 10.3% this year. However, it also said that the country’s economy would bounce back with an impressive 8.8% growth rate in 2021, regaining its position of the fastest growing emerging economy in the world. In 2019, India’s growth rate was 4.2%.
Interestingly, IMF also forecasted that Indian economy will surpass China’s projected growth of 8.2%. The IMF said that revisions of its forecast is particularly large for India, where Gross Domestic Product (GDP) contracted much more severely than expected in the Q2 this year. The World Bank too said in October 2020 that India’s GDP this fiscal is likely to contract by 9.6%.
According to the IMF, global growth would contract by 4.4% in 2020 and bounce back to 5.2% in 2021. It also said that China is the only country among the major economies that will show a positive growth of 1.9% in 2020.