Global forecasting firm Oxford Economics said in a report on Thursday that India will be the world’s worst-affected among the major economies even after the coronavirus pandemic weakens, according to Bloomberg.

The firm added that India’s output will remain 12% below pre-pandemic levels, through the middle of the decade. It also cut India’s growth forecast over the next five years from 6.5% to 4.5%.

Priyanka Kishore, the firm’s head of economics for South Asia and South-East Asia, said the “long-term scars” of the pandemic will substantially reduce India growth in comparison to pre-coronavirus levels. “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, and labor market weakness – will worsen,” she said, according to Bloomberg.

The report added that an adequate fiscal stimulus from the government would have reduced the negative impact on the economy to half. “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, implying the largest amount of scarring among major economies globally,” Oxford Economics said.

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  1. India to enter recession for first time ever as GDP likely to shrink by 8.6% in second quarter: RBI
  2. India’s GDP likely to contract by 10.3% in 2020-’21, says IMF

Several international organisations have made grim forecasts for the Indian economy amid the coronavirus crisis.

Earlier this month, Ratings agency Moody’s Investors Service had revised its forecast for India’s Gross Domestic Product for the current financial year to (-) 8.9%, from the earlier prediction of (-) 9.6%. In October, the International Monetary Fund predicted that the Indian economy would contract by 10.3% in 2020-’21, owing to the lockdowns imposed to combat the coronavirus pandemic. India’s Gross Domestic Product contracted by 23.9% in the first quarter of 2020-’21.

The Reserve Bank of India had said on November 11 that India’s economy was likely to enter a recessionary phase for the first time ever in the second quarter (July-September) of the current financial year, with the Gross Domestic Product expected to contract by 8.6%.