If economic activity is function of Covid control, India has a major challenge: Moody’s chairman

Moody’s Investors Service had last month in its Global Macro Outlook report estimated 3.1 per cent shrink in India’s economy this year.

India’s economic recovery amid the rising number of Covid cases would remain a challenge, according to Moody’s chairman Henry McKinnell. The former chief executive of pharmaceutical company Pfizer, McKinnell, who has also been visiting India frequently since the 1970s, said the increase in Covid cases in Asia’s third-biggest economy means its revival would remain a “major challenge,” he told Financial Times. “The only tool we have right now (to fight coronavirus) is social distancing and that’s exceptionally hard to do in India,” McKinnell added.

India is currently the fourth country in the global tally with most Covid cases — over 6.75 lakh cases so far – marginally less than 6.81 lakh cases in Russia, according to Worldometers. The US has most cases – more than 29.36 lakh while Brazil has over 15.78 lakh cases. While India was quick to take required steps to avoid the pandemic spread by screening foreign passengers coming to India around February onwards itself along with enforcing strict lockdown towards the end of March to eventually undertaking planned reopening of the economic activity, the pandemic has ended up overwhelming the country’s healthcare system.

“The virus will dictate the pace of that recovery,” said McKinnell. “If I’m correct and economic activity is a function of control of the virus, India has a major challenge.” To jumpstart the economy, PM Modi had tried injecting a Rs 20 lakh crore stimulus package in it that also aimed at helping country’s vast small business sector and migrant labourers who suffered the most due to the lockdown and being completely out of business and work for many weeks.

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However, some economists said that the true value of the package was estimated to be less than 2 per cent, Financial Times reported. According to them, the relief measures were some previously budget schemes that were repackaged. Nonetheless, once the country was able to win over the deadly virus, it was aptly placed to attract more manufacturers from China looking to diversify their supply chains in segments including electronics, chemicals or pharmaceuticals, according to McKinnell.

Moody’s Investors Service had late last month in its Global Macro Outlook report estimated 3.1 per cent shrink in India’s economy this year even as it would bounce back to 6.9 per cent in 2021. On the other hand, the growth for China’s GDP in 2020 is projected to be at 1 per cent while 2021 will see a growth of 7.1 per cent. Overall, Moody’s expected the G20 economies to contract 4.6 per cent this year followed by a 5.2 per cent growth in 2021.