“We know from past financial crises that they leave a permanent scar,” said Andy Haldane, the chief economist from Bank of England post the 2008 global financial crisis. In all likelihood, this time won’t be different.
An already-slowing Indian economy has been derailed from its growth track after a stringent shutdown was imposed in March to halt the spread of Covid-19. The jury is still out on whether the lockdown dented the progress of the virus, but it has certainly damaged the economy. India’s GDP is set to contract anywhere between 5% and 10% this year – for the first time in four decades.
Obviously, some of the damage will be long-lasting. Assuming that India’s economy grows at 7% between 2022 and 2024, the permanent loss would be 10%, according to a recent report from Mumbai-based credit ratings agency CRISIL. “To catch-up would require average GDP growth to surge to 11% over the next three fiscals, something that has never happened before.”
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