NEW DELHI: India’s GDP will shrink by 9.6% in the current financial year (2020-21) and not 3.2% estimated in June, the World Bank said on Thursday. The multilateral development bank sharply revised downwards its earlier projection after realising the gravity of the impact of the national lockdown and the income shock experienced by households due to the pandemic.
“The situation is much worse in India than we have ever seen before,” said Hans Timmer, World Bank Chief Economist for South Asia, adding “It is an exceptional situation in India. A very dire outlook.”
The spread of the coronavirus and containment measures have severely disrupted supply and demand conditions in India, the Washington-based global lender said in its latest South Asia Economic Focus report released on Thursday.
The multi-lateral agency noted the Covid shock came at a time when India’s economy was going from bad to worse. “The response of the government to the covid-19 outbreak was swift and comprehensive. Nonetheless, there was a massive contraction in output and poor and vulnerable households experienced significant social hardship—specifically urban migrants and workers in the informal economy,” it added.
The World Bank expects growth to rebound to 5.4% next year if Covid-related restrictions are completely lifted by 2022. “We have seen a loosening of monetary policy. You have seen attempts to increase credit to the private sector to help a company survive,” Timmer said, adding that there have been big efforts in the health sector and expansion of a social safety net. “But with every big crisis, I think, we have to realise that this will not go over anytime soon. And it will actually change the longer-term future also.,” he pointed out.
Despite Govt’s swift action, impact large
The World Bank said there was a massive contraction in output and poor and vulnerable households experienced significant social hardships ‘ specifically urban migrants and workers in the informal economy, despite the Centre’s swift actions