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World Bank downgrades India’s growth forecast to 8.3% in 2021-22

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After the second wave of the COVID-19 pandemic battered India, the World Bank has downgraded its growth forecast for the country from 10.1 per cent in April to 8.3 per cent in 2021-22.  It has predicted a growth of 7.5 per cent for the 2022-23 financial year and 6.5 for the subsequent financial year.

“In India, an enormous second COVID-19 wave is undermining the sharper-than-expected rebound in activity seen during the second half of FY2020/21, especially in services. With surging COVID-19  cases, foot traffic around work and retail spaces has again slowed to more than one-third below pre-pandemic levels since March, in part due to greater restrictions on mobility,” the World Bank said in its Global Economic Prospects report.

Policy support crucial for India’s recovery

The report provides, “For India, GDP in fiscal year 2021-22 starting from April 2021 is expected to expand 8.3 per cent. 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 multilateral lending agency said. Activity is expected to follow the same, yet less pronounced, collapse and recovery seen during the first wave, it said.

The global agency also said, “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.”

China to grow at 8.5%

According to the report, China is expected to grow at 8.5 per cent in the financial year 2021-22—the highest across the globe. However, the Chinese growth story will slow down to 5.4 per cent in 2022-23. The US is expected to grow at 6.8 per cent in the current fiscal, whereas the Eurozone and Japan are expected to grow at 4.2 per cent and 2.9 per cent, respectively.

The global economy is expected to grow 5.6 per cent in 2021, which would eventually slowdown to 4.3 per cent and 3.1 per cent in the two subsequent financial years.

 

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