With 10 Million Job Losses In May Due To COVID, India Inching Towards Double-Digit Unemployment Rate

India's economic situation has worsened once again, with worst-case scenario forecasts suggesting that the toll from the pandemic could be much deeper, igniting fears that the job crisis may worsen over the coming year, a Reuters poll found.

The new restrictions imposed to curtail the current coronavirus outbreak has slowed economic activity, leaving millions of people out of work and forcing experts to reduce their forecasts for the second time since early April.

The current quarter's projection has dropped to 21.6 percent yearly, and 9.8 percent on average for this fiscal year, according to the poll, down from 23.0 percent and 10.4 percent, respectively, a month earlier.

Earlier, the economy was anticipated to increase at 6.7 percent in the next fiscal year, up from the earlier prediction of 6.5 percent.

While the consensus predicted solid growth later this year, all 29 economists cautioned that the forecast was either "weak and prone to further downgrades" or "fragile, with a limited downside".

'Vaccination Needs To Pick Up'

Nobody expected a "strong recovery, followed by an upgrade". "Recovery in India was strong in the months before the second wave. This leads us to believe the recovery can rebound quickly after the number of new infections has come down. But vaccination implementation needs to pick up pace in order to have an effect this year," said Wouter van Eijkelenburg, an economist at Rabobank as reported by Reuters.

The economy witnessed its deepest-ever recession last year, and the consensus projected that in the worst-case scenario, the economy would only grow by 6.8% this fiscal year.

This highlights the concern that a slow vaccine rollout could damage the economy even more. "Let's hope (the situation) doesn't go there. If it does and we do have another wave ... after this one, maybe the government will learn some lessons - that it is better to lock down the economy sooner, rather than later," said Gareth Leather, senior Asia economist at Capital Economics.

According to the Center for Monitoring Indian Economy (CMIE), India's jobless rate hiked to a near one-year high of 14.73 percent in the week ending May 23, exhibiting the effects of the economic downturn.

When asked if there was a chance that India's unemployment situation will plummet in the future year, more than 85% of respondents (25 of 29) responded yes. The remaining four people believed the danger was minimal.

The Reserve Bank of India has maintained a lax monetary policy, including many liquidity measures, and presumed to continue on its course for the rest of the fiscal year. While demand for greater fiscal stimulus to speed up the economy's recovery has rose, the government's response space to the problems posed by the health crisis is limited.

India's economy was already in the doldrums even before COVID hit the country. Economic growth having halved from 8 per cent in the peak of the Modi years to barely 4 per cent in 2019-20.

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