Real GDP growth to be 7.5-12.5 pc: World Bank
"India is bouncing back by opening up activities, starting vaccination and leading in vaccine production," Hans Trimmer, Chief Economist of World Bank.
Washington: India’s economy has bounced back from the Covid-19 pandemic and nationwide lockdown over the last one year, but it is not out of the woods yet, according to the World Bank. In its latest report it has predicted that the country’s real GDP growth for fiscal year 2021-22 could range from 7.5 to 12.5 per cent.
After reaching 8.3 per cent in FY17, growth decelerated to 4.0 per cent in FY20, it said.
The slowdown was caused by a decline in private consumption growth and shocks to the financial sector (the collapse of a large non-bank finance institution), which compounded pre-existing weaknesses in investment, it said.
Given the significant uncertainty pertaining to both epidemiological and policy developments, the real GDP growth for FY22 can range from 7.5 to 12.5 per cent, depending on how the ongoing vaccination campaign proceeds, whether new restrictions to mobility are required, and how quickly the world economy recovers, the World Bank said.
“It is amazing how far India has come compared to a year ago. If you think a year ago, how deep the recession was with unprecedented declines in activity of 30 to 40 per cent, no clarity about vaccines, huge uncertainty about the disease. And then if you compare it now, India is bouncing back, has opened up many of the activities, started vaccination and is leading in the production of vaccination,” Hans Timmer, World Bank chief economist for the South Asia Region, said in an interview.
On the economic side, Timmer said that even with the rebound, there is uncertainty here about the numbers, but it basically means that over two years there was no growth in India and there might well have been over two years, a decline in per capita income.
“That’s such a difference with what India was accustomed to. And it means that there are still many parts of the economy that have not recovered or have not fared as well as they would have without a pandemic. There is a huge concern about the financial markets,” Timmer said.
Noting that the Covid-19 shock will lead to a long-lasting inflexion in India’s fiscal trajectory, the report said that the general government deficit is expected to remain above 10 per cent of GDP until FY22. As a result, public debt is projected to peak at almost 90 per cent of GDP in FY21 before declining gradually thereafter.
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