Concerns over pace of economic recovery deepen as Covid-19 surges: Report

The steady rise in caseloads and the spillover effects of the strict lockdown measures will continue to undermine economic growth in the country, says a report.

According to Dun and Bradstreet's Economy Forecast, concerns over the pace of economic recovery have deepened.

"The recovery now is expected to be gradual as rising infections pose constraints. Even if the growth takes the form of a V-shape, the level of Gross Domestic Product (GDP) will matter. Credit growth has not picked up as envisaged," said Arun Singh, Global Chief Economist, Dun & Bradstreet.

Moreover, with the credit guarantee scheme in place for Small and Medium Enterprises (SMEs), credit off-take was expected to strengthen more than the current level so far, Singh added.

According to various estimates, India's coronavirus-battered economy will witness significant contraction during the current financial year.

India's economy suffered its worst slump on record in April-June, with the GDP contracting 23.9 per cent as the coronavirus-related lockdowns weighed on the already-declining consumer demand and investment.

"The steady rise in caseloads and the spillover effects of the strict lockdown measures will continue to undermine the growth impulses during the subsequent quarters of the year. Constrained government finances, contraction in investment activity and probable defaults, both at the firm and consumer level will continue to be a drag on growth," Singh said.

According to the Union Health Ministry's data updated on Tuesday, the total coronavirus cases in the country mounted to 61,45,291 with 70,589 new infections, while the death toll reached 96,318.

According to the Dun and Bradstreet (D&B) report, following the easing of lockdown restrictions, the pace of contraction in the Index of Industrial Production (IIP) is expected to reduce further.

"The pent-up demand and re-start of small businesses and street vendors along with medium and large firms are likely to drive demand for industrial goods. The index is expected to rebound to the positive territory from the month of October," the report said.

During August, D&B expects IIP to have fallen by (-) 4 per cent to (-) 3 per cent.

According to official data, India's industrial production shrank 10.4 per cent in July.