India to see ‘K-shaped’ recovery as demand hit: Ex- RBI Head D. Subbarao.
Former RBI Governor, Duvvuri Subbarao said that the Indian Economy’s recovery is likely to be K-Shaped because the rising inequality is poised to hit the consumption and growth scenarios. He said in an April 9 interview, “An important consequence of the pandemic has been the sharpening of inequalities. Growing inequalities is not just a moral issue. They can erode consumption and hurt our long-term growth prospects.”
India’s Gross Domestic Product is estimated to grow by 12.5% in the current fiscal year, making it the world’s fastest growing major economy. Numerous fiscal and monetary steps came out after this prediction which strengthened the economic activity once pandemic curbs got eased. But the ongoing surge in the Covid-19 cases has given rise to apprehensions that if the new restrictions are imposed, then our economy, which relies on domestic consumption would cripple.
The economists at Nomura Holdings Inc. lowered their forecasts of GDP on Monday amid the second wave of virus cases. They cut India’s GDP growth estimate for 2021 from 12.4% to 11.5%.
D. Subbarao, who steered the Reserve Bank of India during the global financial crisis, said that this time around policy makers will have limited options. He also said that concerns about inflation might keep the RBI from cutting interest rates besides the worries about ballooning public debt restricting fiscal support.