India is likely to record its worst growth performance since the 1991 liberalisation this fiscal year as the coronavirus outbreak severely disrupts the economy, the World Bank said on Sunday. India’s economy is expected to grow 1.5 per cent to 2.8 per cent in the FY21 which started on April 1, the World Bank said in its South Asia Economic Focus report.
It estimated India will grow 4.8 per cent to 5 per cent in the 2019-20 fiscal that ended on March 31. The COVID-19 outbreak came at a time when India’s economy was already slowing due to persistent financial sector weaknesses, the report said.
To contain it, the government imposed a lockdown, shutting factories and businesses, suspending flights, stopping trains and restricting mobility of goods and people.
“The resulting domestic supply and demand disruptions (on the back of weak external demand) are expected to result in a sharp growth deceleration in FY21 (April 2020 to March 2021),” it said, adding that the services sector will be particularly hit.
A revival in domestic investment is likely to be delayed given enhanced risk aversion on a global scale, and renewed concerns about financial sector resilience.
“Growth is expected to rebound to 5% in Fiscal 2022 (2021-22) as the impact of COVID-19 dissipates, and fiscal and monetary policy support pays off with a lag,” the World Bank said.
The World Bank joins a chorus of international agencies that have made a similar cut in growth estimates in recent days on concerns about the COVID-19 outbreak. The Asian Development Bank (ADB) sees India’s economic growth slipping to 4 per cent in the current fiscal, while S&P Global Ratings has further slashed its GDP growth forecast for the country to 3.5 per cent from a previous downgrade of 5.2 per cent.
Fitch Ratings puts its estimate for India growth at 2 per cent, while India Ratings & Research has revised its FY21 forecast to 3.6 per cent from 5.5 per cent earlier.
Moody’s Investors Service has slashed its estimate of India’s GDP growth during 2020 calendar year to 2.5 per cent, from an earlier estimate of 5.3 per cent.
In its report released on Sunday, the World Bank saw the South Asian region, comprising eight countries, growing by 1.8-2.8 per cent this year, down from the 6.3 per cent it projected six months ago.
Its 2019-20 estimate for India at 4.8-5 per cent is lower by 1.2-1 per cent of the estimate made in October 2019. The 1.5 – 2.8 per cent growth estimate in 2020-21 is lower than 5.4-4.1 per cent estimated in October last year.
“The green shoots of a rebound that were observable at the end of 2019 have been overtaken by the negative impacts of the global crisis,” the World Bank report said, adding India has set aside just over 1 per cent of GDP for programs to increase health sector spending and compensate the unemployed, with the bulk of the money going towards cash transfers, free food and gas cylinders, and interest-free loans. PTI
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