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India’s GDP to Contract by 9.6% in FY 21: World Bank

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India-s-GDP-expected-to-contract-by-9-6-per-cent-this-fiscal-World-BankAs per World Bank’s latest South Asia Economic Focus forecasts, India’s Gross Domestic Product(GDP) is expected to contract by 9.6%(-9.6%) in FY21. This prediction reflects the national lockdown and the income shock experienced by households and firms due to the COVID-19 pandemic. On the other hand it expects a 5.4% rebound in FY22

Regional growth(South Asia) is expected to contract by 7.7% in 2020, after topping 6% annually in the past five years, and rebound to 4.5% in 2021.

Key Info

The rebound 5.4% in FY22 is projected on assuming that the restrictions on COVID-19 are completely removed by 2022, but mostly reflecting base effects, while potential output is expected to remain depressed in the medium-term.

Other Projections for India

i.Fiscal deficit to rise above 12% in FY21 before improving gradually, on assuming that the  combined deficit of the states is contained within 4.5-5 % of GDP.

ii.On account of gradual pace of recovery, public debt is expected to remain elevated around 94%.

iii.Inflation is expected to remain around the target mid-point of RBI(4%) in the near-term.

iv.Current account is expected to reach a surplus of 0.7% of GDP in FY21 and is also projected to return gradually to a deficit in later years.

Financial support by World bank

i.World Bank to deploy up to USD 160 billion in financial support over 15 months, in order to help over 100 countries  protect the poor and vulnerable, develop human capital, support businesses, and bolster economic recovery.

ii.This also includes USD 50 billion of new International Development Association (IDA) resources through grants and high concessional loans.

Additional Info

  • Earlier the World bank had projected India’s growth to contract by 3.2% for FY20-21 in June 2020.

Recent Related News:

The State Bank of India’s (SBI) Ecowrap report estimated that the real Gross domestic Product(GDP) for FY21 is expected to shrink by around 10.9%(-10.9%), a decline of full year growth, against its earlier estimate of 6.8%. The report comes after India’s economy contracted by a record 23.9% in 1st (April-June) quarter of FY21. The report added that all the quarters of FY21 will exhibit negative real GDP growth.

About World Bank:
HeadQuarters– Washington, DC, United States
President– David Robert(R.) Malpass