WASHINGTON: The World Bank on Tuesday slashed its 2021-22 GDP growth forecast for the Indian economy to 8.3 per cent from 10.1 per cent estimated in April, saying economic recovery is being hampered by the devastating second wave of coronavirus infections. It projected a 7.5 per cent economic growth in the 2022-23 fiscal (April 2022 to March 2023).
The Washington-based global lender, in its latest issue of Global Economic Prospects released here, said an enormous second COVID-19 wave in India is undermining the sharper-than-expected rebound in activity seen during the second half of fiscal year 2020-21, especially in services. "India's recovery is being hampered by the largest outbreak of any country since the beginning of the pandemic," the World Bank said.
The projected growth compares to the worst ever contraction of 7.3 per cent witnessed in the fiscal year ended March 31, 2021 (FY21) and 4 per cent expansion in 2019-20. In April this year, the World Bank had forecast a 10.1 per cent growth in Indian GDP for FY22.
This was higher than 5.4 per cent it had projected in January. But now the projections have been slashed. The multilateral lending agency said India's GDP is likely to grow by 6.5 per cent in 2023-24.
In its report, the Bank said that the global economy is set to expand by 5.6 per cent in 2021 - its strongest post-recession pace in 80 years. "For India, GDP in fiscal year 2021/22 starting from April 2021 is expected to expand 8.3 per cent," it said.
It said that activity will benefit from policy support, including higher spending on infrastructure, rural development, and health, and a stronger-than expected recovery in services and manufacturing. "The forecast for FY22 factors in expected economic damage from an enormous second COVID-19 wave and localised mobility restrictions since March 2021," the report said.
It said that activity is expected to follow the same, yet less pronounced, collapse and recovery seen during the first wave. "The pandemic will undermine consumption and investment as confidence remains depressed and balance sheets damaged. Growth in FY 2022/23 is expected to slow to 7.5 per cent, reflecting lingering impacts of COVID-19 on household, corporate and bank balance sheets; possibly low levels of consumer confidence; and heightened uncertainty on job and income prospects," it said.
According to the World Bank, in India, the FY 2021/22 budget marked a significant policy shift. The government announced that the health-related spending would more than double and set out a revised medium-term fiscal path intended to address the economic legacy of the pandemic.
Following deteriorating pandemic-related developments, the Reserve Bank of India (RBI) announced further measures to support liquidity provision to micro, small and medium firms, and loosened regulatory requirements on the provisioning for non-performing loans.
"In India, fiscal policy shifted in the FY 2021/22 budget toward higher expenditure targeted at healthcare and infrastructure to boost the post-pandemic recovery. The renewed outbreak, however, may require further targeted policy support to address the health and economic costs," it added.
On March 31, the World Bank said India's economy has bounced back amazingly from the COVID-19 pandemic and nationwide lockdown over the last one year, but it is not out of the woods yet.
It had predicted that the country's real GDP growth for fiscal year 21/22 could range from 7.5 to 12.5 per cent in its latest South Asia Economic Focus report released ahead of the annual Spring meeting of the World Bank and the International Monetary Fund (IMF).
In April and May, India struggled with the second wave of the COVID-19 pandemic with more than 3,00,000 daily new cases. Hospitals were reeling under a shortage of medical oxygen and beds. In mid-May, new coronavirus cases in India hit a record daily high with 4,12,262 new infections.
On Tuesday, India reported less than one lakh new coronavirus infections after a gap of 63 days, while the daily positivity rate dropped to 4.62 per cent.
A single day rise of 86,498 cases were registered, the lowest in 66 days, taking the total tally of COVID-19 cases to 2,89,96,473. The COVID-19 death toll climbed to 3,51,309 with 2,123 daily deaths, the lowest in 47 days.