Growth to stay negative in remaining 3 qtrs, FY21 to see 12.6% contraction: NCAER

The GDP growth rates in the remaining three quarters of this financial year — i.e. July-September, October-December and January-March — are expected to remain negative at (-) 12.7 per cent, (-) 8.6 per cent and (-) 6.2 per cent, respectively, with the overall gross domestic product (GDP) growth rate for the full year seen at (-) 12.6 per cent, the National Council of Applied Economic Research (NCAER) said Friday.

The think-tank, in its quarterly review of the economy, said that the Indian economy will catch up with its pre-pandemic growth path of 7 per cent only by 2037-38. “Post 2020-21 annual growth of 7 per cent would imply a growth swing of 20 per cent not ever seen so far in India. Assuming optimistically that 7 per cent growth is indeed achieved because of the base effect of a steep decline in 2020-21, combined with strong policy measures to revive growth; we would still reach the previous peak output level of 2019-20 only by the end of 2022-23. If that annual growth path of 7 per cent can be sustained over the long term, again a heroic assumption, the economy will catch up with its pre-pandemic growth path only by 2037-38,” it said.

A more likely scenario is that after getting back to its previous peak output level by 2022-23 the economy will settle back to its pre-pandemic growth path of 5.8 per cent, it said. NCAER said the references to V-shaped recovery obfuscate more than they reveal.

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“The fact is that economic hysteresis, the medium to long-term footprint of a major economic shock, is indeed very long,” the think-tank said.

Going ahead, to bring back the economy on a higher-growth path would require reforms similar to the scale seen in 1991. “To nudge the economy to any higher growth path would require ambitious economic reforms across a wide front like the 1991 reforms. A strong revival of global demand could also move the economy to a higher growth path,” it said.