The Indian economy is set to rebound in the second half of 2020 as the impact of the COVID-19 pandemic recedes, and is projected to grow by 6.7% in the next financial year, IHS Markit said in its outlook on the Indian economy on 23 July, 2020.
The pandemic resulted in severe disruptions in industrial production and consumption spending in India during April and May. The severe negative impact is expected to result in a significant contraction in GDP in the April-June quarter of 2020. However, as lockdown conditions have been progressively eased, early signs of recovery were evident in the most recent economic data.
The IHS Markit Purchasing Managers’ surveys for India showed that economic momentum improved in June, reflecting the easing of COVID-19 related restrictions during May and June.
“IHS Markit forecast that the Indian economy will rebound as the impact of the pandemic recedes, with improving economic growth momentum in the second half of 2020 and positive GDP growth of 6.7% in the 2021-22 financial year,” said Asia Pacific Chief Economist at IHS Markit.
Despite the negative short-term shocks from the pandemic, total foreign direct investment into India has remained buoyant. Foreign direct investment by technology firms in the first seven months of 2020 has already reached around $17 billion, boosted by the $10 billion new investment announced by Google in mid-July.
Facebook, Amazon, and Foxconn are among the other global technology firms that have committed large new investments into India this year, IHS said.
A major boost to investor confidence in the Indian medium-term economic outlook has come from new foreign direct investment into India announced during 2020 by US technology companies like Google, Facebook, and Amazon, the report said.
IHS said the medium-term economic outlook for India remains favorable, supported by a number of key growth drivers.
An important positive factor for India is its large and fast-growing middle class, which is helping to drive consumer spending. Total Indian consumer spending is forecast to grow by 42% between 2020 and 2025, measured in USD terms at constant prices, it said.
The digital transformation of India that is currently underway is expected to accelerate the growth of e-commerce, changing the retail consumer market landscape over the next decade. This is attracting leading global multinationals in technology and e-commerce to the Indian market, the report added.