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Oxford Economics cuts India’s 2020-25 growth average to 4.5%

Growth pangs:Headwinds hampering growth prior to 2020, such as elevated bank NPAs, will worsen.V. Sreenivasa MurthyV. Sreenivasa Murthy  

Global forecasting firm Oxford Economics on Thursday revised downwards its India growth forecast over the medium term to an average 4.5% over 2020-25, from its pre-pandemic projection of 6.5%.

In a research note, it said India’s post-COVID-19 scars could be among the worst in the world.

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

It said an adequate and well-designed fiscal stimulus would halve this impact by limiting deterioration in pre-COVID-19 headwinds.

“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,” Oxford Economics said.

It added that the Indian government has announced various schemes and reforms this year, with an eye on the medium-to-long-term growth.

“However, its policy implementation track record is mixed and is likely to have been weakened further by recent social and institutional developments that detract from its capacity to focus on economic policymaking,” the forecasting firm said.

“It’s likely that headwinds 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 (NBFCs), and labour market weakness — will worsen,” it noted.