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The Statesman / ANN – India’s economic growth is expected to contract by 9 percent this fiscal year from 4 percent forecast in June as the economy continues to reel under the Covid-19 pandemic, the Asian Development Bank (ADB).
ADB joins a number of major rating agencies that have recently revised their forecasts to further contract the Indian economy. S&P Global Ratings on Monday cut its fiscal year 21 growth forecast for India to (-) 9 percent, from (-) 5 percent previously estimated, saying the surge in COVID-19 cases would keep spending private and lower investment for longer.
Last week, two other global rating agencies, Moody’s and Fitch, projected that the Indian economy would contract 11.5% and 10.5% respectively in the current fiscal year. However, Goldman Sachs has estimated the contraction at 14.8 percent.
In its 2020 Asian Development Outlook (ADO) Update, the ADB forecasts “a strong recovery for the economy in fiscal 2021, with GDP growth of 8.0 percent as mobility and business resume. more generally “.
“India imposed strict lockdown measures to contain the spread of the pandemic and this has had a severe impact on economic activity,” said ADB chief economist Yasuyuki Sawada.
“It is crucial that containment measures, such as robust testing, monitoring and assurance of treatment capabilities, are implemented consistently and effectively to stop the spread of COVID-19 and provide a sustainable platform for recovery from the economy for the next fiscal year and beyond, ”he added.
The growth outlook remains highly vulnerable to a protracted outbreak or case resurgence, and the country now has one of the highest numbers of COVID-19 cases globally. India recorded 4.93 million cases as of September 15, while the US leads with 6.57 million cases.
“Other downside risks include rising levels of public and private debt that could affect investment in technology and infrastructure, as well as rising non-performing loans caused by the pandemic that could further weaken the financial sector. and its ability to support economic growth. “
Government initiatives to address the pandemic, including the rural employment guarantee program and other social protection measures, will help rural incomes protect vulnerable people, but private consumption may continue to suffer.
Investment is also expected to contract as investors remain discouraged by increased risks and uncertainties. The fiscal deficit is expected to increase significantly in fiscal 2020 as government revenues decline and expenditures increase, ”he said.
The government also introduced reforms in response to the COVID-19 pandemic, focusing on improving agricultural markets, improving the industrial park infrastructure, and implementing the National Infrastructure Pipeline.
“These efforts will promote foreign investment, incentivize global supply chains to reallocate to India, and create manufacturing hubs across the country. Financial support for low-income groups and small businesses can also help jump-start the economy in a more inclusive way, ”the report says.
The ADB expects inflation to fall in the rest of fiscal 2020 to 4.5 percent with moderate food prices and lower economic activity, and then decline further to 4.0 percent in fiscal 2021.
“India’s current account deficit is forecast to shrink to 0.3% of GDP this fiscal year, then widen to 0.6% of GDP in fiscal 2021 and exports are expected to recover to as world growth picks up. “
For developing Asia, the ADB forecasts a 0.7% decline in GDP in 2020. This year’s contraction would be the first since 1962.
However, China is forecast to reverse the trend with 1.8% growth this year. Its growth is projected to accelerate to 7.7% in 2021.
Developing Asia excludes advanced nations like Japan.
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