India’s economy to shrink by 9 per cent in 2020: Asian Development Bank
However, ADB expects India to bounce back with an 8% growth in 2021 as the country begins to emerge from the economic devastation.
The Asian Development Bank announced on September 15, 2020, that India’s economy is expected to contract by 9% in 2020-worse than the 4% contraction which the bank had forecasted three months ago.
In the first quarter of the Current Fiscal Year, India’s Gross Domestic Product (GDP) had contracted by a record 23.9% as the COVID-19 lockdown stalled business and consumer spending.
However, ADB expects India to bounce back with an 8% growth in 2021 as the country begins to emerge from the economic devastation which has been caused by the ongoing COVID-19 pandemic.
• The Asian Development Outlook (ADO) 2020 Update for elsewhere forecasts minus 0.7% GDP growth for the developing Asia in 2020, which marks its first negative economic growth since the early 1960s.
• The growth will rally to 6.8% in 2021, in part because it will be measured relative to a weak 2020, leaving next year’s output below pre-COVID-19 projections.
• About three-quarters of the region’s economies have been expected to post negative growth in 2020.
• As per ADB Chief Economist, Yasuyuki Sawada, most of the economies in Asia and the Pacific Region can expect a difficult growth path for the rest of 2020.
• The economic threat by the pandemic remains potent as the extended first waves or the recurring outbreaks can prompt further containment measures.
ADB on COVID-19 affecting Asia’s economy:
• As per ADB, a prolonged pandemic remains the biggest downside risk to the region’s growth in 2020 and 2021.
• Other downside risks arising from the geopolitical tensions, which include an escalation of technology and trade conflict between China and the United States.
• China is also one of the few economies in the region that have been bucking the downturn. It is expected to grow by 1.8% in 2020 and 7.7% in 2021 along with successful public health measures providing a platform for growth.
• Sub-regions of developing Asia have been expected to post negative growth in 2020 except for East Asia, which is forecasted to expand by 1.3% and recover strongly to 7% in 2021.
• Some economies that rely heavily on trade and tourism, particularly in South Asia and the Pacific face double-digit contractions in 2020.
• As per the ADB forecasts, most of developing Asia will recover in 2021, except for some of the economies in the Pacific.
• The inflation forecast for the developing Asian region is revised towards to 2.9% in 2020 from 3.2% forecast in April due to the continued oil prices and weak demand. Inflation for 2021 has been expected to ease further to 2.3%.
Policies to mitigate the risk:
In order to mitigate the risk caused by COVID-19, the governments in the region have been delivering wide-ranging policies responses including the policy support packages which amounts to 3.6 trillion dollars or equivalent to about 15% of the regional GDP.
The coordinated and consistent steps to address the pandemic along with the policy priorities focusing on livelihoods of people and protecting lives who are most vulnerable as well as ensuring the safe return to work and restart of the business activities will continue to be crucial to ensure that the region’s eventual recovery is inclusive and sustainable.