The World Bank said on Wednesday that the Indian economy was projected to contract 9.6% in fiscal year 2020-21 due to the Covid-19 pandemic, and that it was in a much more dire situation than during the crisis. of balance of payments of the decade of 1980. leading to 1991.
South Asia as a region will sink into its worst recession with a sharper-than-expected contraction of 7.7%, the World Bank said in its semi-annual South Asia Focus update released Thursday.
“The situation is much worse in India than we have seen before,” Hans Timmer, the World Bank’s chief economist for the South Asia region, told reporters. He added that it was “much worse” than the balance of payments crisis, which had marked a record low for India and the region.
India was forced to pledge parts of its gold reserves in 1991, physically sent to the Bank of England and the Bank of Japan, to secure a rescue package from the International Monetary Fund (IMF) to avoid defaulting on payment obligations abroad. . The year 1991 also marked the beginning of economic reforms.
Timmer said that one of the reasons India was hit hard was the “lockdown that was initially imposed (which) was very strict.” This was reflected in the -25% quarterly growth, he added.
Akhil Berry of Eurasia Group, a global consultancy, said: “The estimated contraction is shocking, but is in line with other projections, given that India imposed one of the strictest closures in the world and the number of cases in the main economic centers. like Mumbai and Delhi he’s still high. “
Fitch has projected that the Indian economy will contract by -10.5%, Goldman predicts a contraction of -14.8% and the Asian Development Bank (ADB) by -9%.
The World Bank said Covid-19 trapped India because its economy was already slowing down and was weakened by financial sector woes, and praised the Modi government’s “swift and comprehensive” response: a strict lockdown, complemented by measures. social protection for the poor and business support.
“However, there was a massive contraction in production and poor and vulnerable households experienced significant social hardship, specifically urban migrants and workers in the informal economy,” the report says.
He added: “Overall, the pandemic has likely increased urban poverty, creating a pool of ‘new poor’ characterized by non-farm employment and secondary or tertiary education.”
The bank has projected growth to rebound to 5.4% in fiscal 2021-22. But Timmer said what has become clear from this crisis is that India “has to rethink federal policies, especially those related to the informal sector … there are no systems to support these people.”
While the poor suffered due to rising food prices, Covid-19 dealt “a further blow to many informal workers” who experienced a sharp drop in income and had no social security or savings to turn to, he said. report, urging governments in the South Asia region to “design universal social protection as well as policies that support increased productivity, skills development and human capital.”
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