The Asian Development Bank has projected that the Indian economy will shrink by 4% in FY21 as business operations were halted for over two months due to the nationwide lockdown. Earlier, ADB had projected that India’s economy will climb up at 4% this fiscal.
The development bank is expecting Asia’s third-largest economy to get back to track in FY22 and increase at 5% as economic activity eases gradually.
In its Asian Development Outlook Supplement, the agency said that as the impact of COVID-19 on South Asia is getting clearer, the economic outlook seems to be grim. “After the introduction of lockdowns in late March, economic activity in South Asia has stalled. While the pandemic continues to spread throughout the sub-region, containment measures have started to ease, and economic activity has resumed somewhat in many countries in the sub-region since late May.”
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ADB said the authorities in the sub-region have applied significant fiscal and monetary support to fight the pandemic and cushion its adverse impact. “However, the partial and slow reopening of economies as infections continue to rise makes for a difficult growth environment. Recovery is expected to be slow,” it added.
The development bank also noted that India’s GDP growth slowed to 3.1% in the March quarter of FY20 and it is the slowest since early 2003.
“Economic growth slowed to 4.2% in the whole of FY20 as both exports and investment started to contract. High-frequency indicators such as purchasing managers’ indexes fell to all-time lows in April, reflecting the bleak outlook. Migrant workers have gone home to their villages after losing their jobs in the cities and will be slow to return even after containment measures are relaxed,” it added.