Tashkent, Uzbekistan (UzDaily.com) -- Against the backdrop of the coronavirus pandemic and the restrictions imposed in this regard, the Indian economy is in deep recession.

According to Reuters and Bloomberg estimates, over 3 months (April-June of this year), the Indian economy contracted by about 20% compared to the same period of last year. Barclays Bank experts are even more pessimistic, noting that the Indian economy contracted by 25.5% in 3 months.

Commenting on the current situation in the Indian economy, economists note that after the government began to gradually open the economy in May this year, some sectors of the economy have noticeably revived. Sales of cars and motorcycles grew, demand for electricity increased, trade intensified, but these indicators subsequently began to slow down. Experts believe that the reasons for this are the following factors.

1. In general, the country failed to stop the spread of the coronavirus. The number of reported cases of the virus has exceeded 3.5 million, making India the third country in the world in terms of the number of infected. There is a daily increase in patients. “As long as the number of cases of COVID-19 infection grows, the economy will not return to the level before the pandemic,” economists warn.

2. In May in India, federal restrictions have been lifted to combat coronavirus, but local lockdowns continue across many states. There is a lack of coordination between the states and the Center, which affects the supply chain of products for both export and domestic markets, limiting business opportunities and increasing transport costs.

Domestic consumption, India’s traditional growth engine, fell for the first time in 40 years. Axis Bank has estimated the monthly loss from the decline in consumer demand at 1.4% of the country’s GDP. The slowdown in economic activity led to a drop in tax collections for April-June of this year. 41% (US$25 billion) over the same period of last year.

The global pandemic has ruined India’s economic development plans. The government had to distract from the solution of many social security programs, incl. including improving citizens’ access to drinking water and universal health care to cope with a host of new challenges, including foreign capital flight.

Against the backdrop of the pandemic, to implement a set of measures to support the economy, the Indian government allocated budgetary funds in the amount of about US$265 billion.

Another US$13.5 billion was directed to direct financial support for the poorest segments of the population.

According to the IMF, these and other measures at the end of this year. will lead to a budget deficit of 7.4% of the country’s GDP.

In order to find funds to cover the budget deficit, the government of India has launched a program for the large-scale privatization of state assets, in particular, railways.

The government plans to announce tenders for the sale of 109 rail routes to private investors, which will cover the main economic centers of the country, including Mumbai, Bangalore, New Delhi, Chennai, Howrah and others.

The Indian government hopes to receive about US$4 billion at the first stage of privatization of railways, which will be used to address issues of economic stimulation.

However, given the current economic uncertainty, private companies are unlikely to be willing to invest in new projects. Moreover, such strategies may not be helpful in obtaining immediate financial support. “They are good for generating income in the medium term,” economists warn.

In general, experts note that economic normalization in India will come only when the health crisis is under control.

If the country does not cope with the pandemic by the end of this year and negative trends in the economy will grow, the government will be forced to switch to borrowing abroad, increasing the country’s national debt, which contradicts the fiscal policy declared by N. Modi.