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Oxford Economics downwards India's growth forecast at 4.5% for 2020-25

MUMBAI: Oxford Economics, one of the leading global forecasting firm on Thursday in a report downgraded its growth forecast for India over the medium term to an average 4.5% over 2020-25, from its pre-pandemic projection of 6.5%.

While downwards revising the growth, the Oxford Economics report has said that India‚Äôs post-COVID-19 scars could be among the worst in the world. According to the report India will be the worst affected among the world's major economies even after the coronavirus pandemic wanes, with output 12 % below pre-virus levels through the middle of the decade. 

The report said that despite having one of the most stringent lockdowns globally, India's direct fiscal response to COVID-19 so far amounts to just 2.5% of GDP, with the lion's share of the US$ 230 billion fiscal package earmarked for liquidity and financing support schemes.

Beyond 2020, the report said that India remains one of the most rapidly growing economies in their baseline, but, that is not enough to preclude a large medium-term output loss in the wake of COVID-19. "Even after the pandemic is contained, India's economy will have to deal with its aftermath," it said.

"It's likely that headwinds already hampering growth prior to 2020 such as stressed corporate balance sheets, elevated non-performing assets (NPAs) of banks, the fallout in non-bank financial companies (NBFCs), and labour market weakness will worsen," it noted further saying that, "The resulting long-term scars, it said, would probably among the worst globally and would push India's trend growth substantially lower from pre-COVID-19 levels."

"While we forecast that the central government's fiscal deficit will widen to 7% of GDP in 2020-21 from 4.7% in 2019-20, it's unlikely to deliver a meaningful boost to growth because it's not the result of a surge in spending," the report added.

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