World Bank raises India's FY22 GDP forecast to 10.1 percent from earlier 5.4 percent 

The World Bank has raised India's Fiscal Year 2021-22 GDP growth prediction to 10.1 percent from 5.4 percent projected in January. This is a result of a strong rebound in private consumption and investment growth. 

The World Bank also predicted that the country's real GDP growth for FY22 would be in the range of -7.5 to 12.5 percent considering the uncertainty in 2021-22. This was shared in the World Bank's South Asia Economic Focus Spring update report.

The international bank noted that government consumption is expected to rise by about 16.7 percent in 2021, which will reflect a strong fiscal stimulus in India. 

Key Highlights

•The World Bank has also revised upwards other demand categories, as India's vaccination drive is expected to improve business activity and spur incomes in contact-intensive sectors.

•The World Bank noted that the increase in foreign direct investment (FDI) in India in 2020 was enough to make South Asia the only major region in the developing world to see a surge in FDI in 2020. India is the largest country in the region. 

•The bank noted that India was the only country in the region to see an increase in FDI during 2020. The FDI was equal to 1.5 percent of GDP.

•It also noted how India has been attracting record deals in IT consulting and digital sectors including e-commerce platforms, data processing services and digital payments. However, much of the increase has come from mergers and acquisitions. 

•The World Bank further noted that a combination of capital inflows, FDI and dampened import demand-led India's net international reserves to almost double to 17.3 months of imports of goods and services from 10.7 in 2019.

Background

As per World Bank's report, overall the South Asia region is expected to grow by 7.2 percent in 2021 and 4.4 percent in 2022. The growth will be driven by the firm bounce-back from a very low base in mid-2020, from a revised GDP decline of 5.4 percent in 2020.