India to report slowest growth in FY21: World Bank
As per World Bank, India’s economy is expected to grow 1.5 percent to 2.8 percent in FY21 which started on April 1.
World Bank in its South Asia Economic Focus report has stated that India will be recording its worst growth performance in FY21 since the 1991 economic reforms. The slow growth will be the result of a Coronavirus outbreak which has disrupted the economy severely.
As per the report, the COVID-19 outbreak happened when India’s economy was already slowing due to financial sector weaknesses. The precautions taken by India against the virus will supposedly result in a sharp growth declaration in FY21.
World Bank also added that the economic result in the prolonged lockdown will be much worse than the given prediction.
• As per World Bank, India’s economy is expected to grow 1.5 percent to 2.8 percent in FY21 which started on April 1. The earlier estimated growth for India was 4.8 percent to 5 percent in 2019-20 FY that ended on March 30.
• The Government imposed lockdown, suspending flights, shutting factories and businesses, restricting the mobility of goods and people will impact the service sector.
• As per the World Bank, the growth is expected to rebound 5% in Fiscal 2022 as the impact of COVID-19 decreases.
• In its report, World Bank saw the South Asian Regions, mainly comprising of eight countries, to grow by 1.8-2.8 percent this year. It was down from 6.3 percent that it projected six months ago.
• As per World Bank’s report, India has set aside just over 1 percent of GDP for programs that will compensate the unemployed and will increase health sector spending, with also the bulk of the money going towards free food, interest-free loans, and cash transfers.
India’s growth estimates by other International Agencies:
• The Asian Development Bank sees India’s economic growth rate down to 4 percent in the current fiscal.
• Standard & Poor’s Global Ratings have slashed its GDP forecast for India to 3.5 percent from a previous downgrade of 5.2 percent.
• Fitch Ratings has put India’s estimated growth at 2 percent.
• India Ratings & Research has estimated India’s growth to be 3.6 percent from 5.5 percent earlier.
• Moody’s Investor Services has slashed the estimated growth to 2.5 percent from an earlier estimation of 5.3 percent.
Suggested measures by the World Bank to address this challenge:
• To focus on mitigating the spread of the disease and making sure that everybody has food.
• There should be a focus on temporary job programmes, especially at local levels.
• To prevent bankruptcies especially of small and medium-sized enterprises.
World Bank and India working together to overcome this challenge:
World Bank has approved USD 1 billion to India and the first portion of the amount has already released. The first portion of the fund will deal with the emergency in the health care sector, including the delivery of civilian diagnostic equipment. It will include additional capacity to deal with testing and making tests available that will benefit the entire population.
Apart from this, World Bank is also working with India on two additional operations and they are expected to be ready in a few weeks. The operations include banking and micro, employment, small and medium enterprises sector.