India’s Gross Domestic Product (GDP) contracted by 7.3% in 2020-21.
This is a cause of concern because India’s GDP growth has been declining in the past 5 years. The GDP growth rate was 8% in FY17 but declined to about 4% in FY20, just before Covid-19 hit the country.
Economists say that the Covid-19 rendered a big blow to India’s economy which was already deteriorating in the aftermath of demonetization, GST and other financial sector weaknesses. To make matters worse the government had to impose lockdown, shutting shop, and factories businesses besides stopping flights and trains services restricting the mobility of goods and people.
The World Bank has suggested that India should focus on mitigating the spread of the disease and make sure that everybody has food. These initiatives should be supported by temporary jobs to prevent bankruptcies, especially at the grassroots levels.
The help India overcome the crisis; the World Bank has approved USD 1 billion. The first tranche of this amount has already been disbursed to deal with the emergency in the health care sector.
Other international agencies that have made a similar growth estimates:
- The Asian Development Bank has forecast India’s economic growth to decrease to 4% in the current fiscal.
- S&P Global Ratings has estimated the GDP growth forecast to 3.5%.
- Moody’s Investors Service has slashed India’s GDP growth to 2.5%
Seasoned economists predict the worst-ever recession and downturn not just in India but the entire South Asia region mainly due to pandemic-induced fall in investment and exports as well as a decline in private consumption.
However, all hope is not lost as economists expect India’s growth to rebound to 5.4% in 2021-22 but that is provided Covid-related lockdown and restrictions are completely lifted by 2022.