As the second case of Coronavirus surfaces in India, the Modi government’s estimates of a 10 per cent nominal GDP growth in the next fiscal seem difficult to achieve. The virus outbreak has taken place amid a longer-than-anticipated slowdown, coupled together which may make the economy weaker on the both domestic and global front. “The nominal GDP growth assumption at 10 per cent risks an undershoot in our view, given our less sanguine expectation on India’s cyclical recovery prospects. This is especially true now with a new headwind to global growth in the form of the Coronavirus,” said Suyash Choudhary, Head – Fixed Income, IDFC AMC.
Although slightly premature to say, the reaction functions of global central banks may accordingly change as well to take into account this new growth headwind, he added. The Coronavirus is also known as an economy-killer as it spreads rapidly. If the global economy sneezes, India catches a cold too as trade plays an important role in the country’s economy.
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To minimise the risk and prevent itself from this potential threat, the Indian government has started to take extensive preventive measures. Cabinet Secretary yesterday held a high-level review meeting on the preparedness for Novel Coronavirus with Secretaries of Health, Civil Aviation, Textiles, Pharmaceutical, Department of Health Research (DHR), and Directorate General of Foreign Trade (DGFT), according to the statement of the Ministry of Health and Family Welfare The Cabinet Secretary has held five review meetings so far on this concern.
The virus is closely associated with the economy as it severely hampers industries as people across the world become skeptical to carry on any business activity in the affected areas. Meanwhile, Federal Reserve Chairman Jerome Powell had earlier said that the rapidly spreading China virus is emerging as a potentially major threat to the global economy, leaving policymakers grappling with the impact of the US-China trade war. He also said that the extent of the economic damage that the Coronavirus may ultimately inflict, in China or around the world, remains unknown.
