India will suffer significant scarring from COVID 19, growth at 4.5% until 2025 – Oxford Economics

Global forecasting firm Oxford Economics said in its report on Thursday that India will be the world's worst-affected among the major economies even after the coronavirus pandemic weakens. The Oxford Economics revised downwards its India growth forecast over the medium term to an average 4.5 per cent over 2020-25, from its pre-pandemic projection of 6.5 per cent.

"We forecast India's growth equilibrium to worsen substantially over the medium term, with potential growth averaging just 4.5 per cent over 2020-2025 in our latest baseline, as opposed to our pre-virus forecast of 6.5 per cent," Oxford Economics said.

In the report, Priyanka Kishore, head of economics for South Asia and South-East Asia, raised her concerns that the balance sheet stress that had been building before the coronavirus outbreak will probably worsen.

"It's likely that headwinds are already hampering growth prior to 2020 — such as stressed corporate balance sheets, elevated non-performing assets of banks, the fallout in non-bank financial companies, and labour market weakness -–will worsen," she said.

"The resulting long-term scars, probably among the worst globally, would push India's trend growth substantially lower from pre-Covid levels," she further added. According to the report, an adequate fiscal stimulus from the government would have reduced the negative impact on the economy to half. "But, given the low likelihood of such a comprehensive response, we project India's GDP per capita to be 12% below our pre-virus baseline even in 2025, implying the largest amount of scarring among major economies globally," Oxford Economics said.

Several other international organisations have made varying predictions for the Indian economy amid the coronavirus crisis. According to the Economics Time, Barclays which altered its fiscal 2022 growth forecast for the Indian economy to 8.5% from an earlier projection of 7%, said that the country would "return to normal" faster than expected as the COVID-19 curve in the world's second-most populous nation starts flattening.

On the other hand, RBI predicts India to witness a positive GDP growth in the fourth quarter.