The enormous second COVID-19 wave is undermining the sharper than expected rebound in activity seen in India during the second half of FY21 says World Bank in a report. The multilateral agency expects India’s FY22 GDP at 8.3% while it pegs FY23 GDP at 7.5%.
“Growth in FY23 is expected to slow down to 7.5% reflecting lingering impact of COVID-19 on household, corporate and bank balance sheets; possibly low levels of consumer confidence; and high level of uncertainty on job and income prospects,” the report said.
The World Bank says the pandemic will undermine consumption and investment in India as confidence remains depressed and balance sheet damaged. However, it expects global economy to expand 5.6% in 2021, the fastest post-recession pace in 80 years, largely on strong rebounds from a few major economies.
For India, GDP in fiscal year 2021-22, starting April 2021, is expected to expand 8.3 percent. Activity will benefit from policy support, including higher spending on infrastructure, rural development, and health, and a stronger-than-expected recovery in services and manufacturing.
Although the forecast has been revised up by 2.9 percentage points, this masks significant expected economic damage from an enormous second COVID-19 wave and localized mobility restrictions since March 2021. Activity is expected to follow the same, yet less pronounced, collapse and recovery seen during the first wave. The pandemic will undermine consumption and investment as confidence remains depressed and balance sheets damaged.
Growth in FY2022-23 is expected to slow to 7.5 percent reflecting lingering impacts of COVID-19 on household, corporate and bank balance sheets; possibly low levels of consumer confidence; and heightened uncertainty on job and income prospects.
In India, an enormous second COVID-19 wave is undermining the sharper-than-expected rebound in activity seen during the second half of FY2020-21, especially in services. With surging COVID-19 cases, foot traffic around work and retail spaces has again slowed to more than onethird below pre-pandemic levels since March, in part due to greater restrictions on mobility
In India, the FY2021-22 budget marked a significant policy shift. The government announced health-related spending would more than double and set out a revised medium-term fiscal path intended to address the economic
legacy of the pandemic. Following deteriorating pandemic-related developments, the Reserve Bank of India announced further measures to support liquidity provision to micro, small, and medium firms and loosened regulatory requirements on the provisioning for non-performing loans, the report added.
In India, fiscal policy shifted in the FY2021-22 budget toward higher expenditure targeted at health care and infrastructure to boost the post-pandemic recovery. The renewed outbreak, however, may require further targeted policy support to address the health and economic costs, the report further said.
