World Bank sees 8.3% GDP growth in FY 2022
The World Bank’s Regional Economic Update released on Thursday said that post the deadly second wave of COVID-19 in India, vaccinations have geared up and most of the population is done with the first jab. This will surely determine economic prospects this year and beyond. The bank also cautioned that the trajectory of the pandemic will cloud the outlook in the near term until herd immunity is achieved.
India’s gross domestic product (GDP) shrank by 7.3 percent (that is, a minus 7.3 percent) under the onslaught of the pandemic last fiscal year. What sounds interesting here is that the GDP is expected to record the 8.3 percent growth this fiscal year, which will moderate to 7.5 percent next year and 6.5 percent in 2023-24, says an Update issued ahead of the bank’s annual meeting next week.
Of the major economies, as of now, China has a forward foot with its economy expected to grow by 8.5 percent during the current calendar year after the Bank revised it upwards from the 8.1 percent projection in April.
However, it is worthy to note that China’s growth rate is projected to come down to 5.4 percent next year and 5.3 percent in 2023. Last year, it grew by 2.3 percent.
For the entire South Asia region, the bank’s Update estimates the GDP growth to be 7.1 percent this year and the next.
Bangladesh, which recorded a growth of 5 percent last fiscal year, is expected to grow by 6.4 percent this year and 6.9 percent the next.
Maldives‘ tiny economy of $3.8 billion, which had the steepest fall of 33.6 percent last calendar year is expected to recover and record a growth of 22.3 percent this year. Next year it is expected to come down to 11 percent and 12 percent in 2023.
Whereas, Pakistan’s economy that grew by 3.5% last fiscal year, is expected to grow by 3.4 percent this year and 4 percent next year.
For Sri Lanka, the bank expects a growth of 3.3 percent this calendar year compared to a shrinkage of 3.6 percent last year and to grow by 2.1percent next year and 2.2 percent the following year.
Bhutan, which had negative growth of 1.2 percent the last fiscal year, is expected to reach 3.6 percent this fiscal year and 4.3 percent the next.
Nepal‘s growth is expected to rebound from last fiscal year’s 1.8 percent to 3.9 percent this fiscal year and 4.7 percent the next.
The bank opines that due to COVID-19 pandemic India’s economy went into contraction in FY21 (the fiscal year 2020-21) despite well-crafted fiscal and monetary policy support.”
The bank further said that the growth recovered in the second half of the last fiscal year driven primarily by investment and supported by an unlocking of the economy and targeted fiscal, monetary, and regulatory measures. Manufacturing and construction growth recovered steadily.
Although the second wave took a toll on many lives in India as compared to the first wave in 2020, economic disruption was limited since restrictions were localized, with the GDP growing by 20.1 percent in the first quarter of the current fiscal year compared to the first quarter of 2020-21, the Update of the bank said.
It attributed the spurt to a significant base effect (that is, coming off a very big fall as compared to the quarter), strong export growth, and limited damage to domestic demand.
Looking ahead, the Bank’s Update said that “successful implementation of agriculture and labour reforms would boost medium-term growth” while cautioning that “weakened household and firm balance sheets may constrain it.”
“The Production-Linked Incentives scheme to boost manufacturing, and a planned increase in public investment, should support domestic demand,” it said.
The extent of recovery during the current fiscal year “will depend on how quickly household incomes recover and activity in the informal sector and smaller firms normalizes.”
Among the risks, it listed “worsening of financial sector stress, higher-than-expected inflation constraining monetary-policy support, and a slowdown in vaccination.”
Taking stock of the pandemic’s effects, the bank said, “The toll of the crisis has not been equal, and the recovery so far is uneven, leaving behind the most vulnerable sections of the society – low-skilled, women, self-employed and small firms.”
But it said that the Indian government has taken steps to strengthen social safety nets and ease structural supply constraints through agricultural and labour reforms to deal with the inequality.
The Indian government continued investing in health programs and has started to address the weaknesses in health infrastructure and social safety nets (especially in the urban areas and the informal sector) exposed by the pandemic.
[With Inputs from IANS]
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