Indian economy to contract by 4% in FY21 – Asian Development Bank

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  Indian economy to contract by 4% in FY21 – Asian Development Bank

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COVID-19 impact - 

1. Hit hard by the coronavirus pandemic, the Indian economy is expected to contract by 4 per cent during the current financial year.

Highlights - 

1. As per the ADB forecast, Countries in Developing Asia will “barely grow” in 2020.
2. China, however, is expected to record a positive growth of 1.8 per cent in 2020, sharply down from 6.1 per cent in 2019.
3. Growth in Indian GDP slowed to 3.1 per cent in the last quarter of fiscal year 2019, its slowest since early 2003.
4. Economic growth slowed to 4.2 per cent in the whole of FY2019 as both exports and investment started to contract.
5. High-frequency indicators such as purchasing managers’ indexes fell to all-time lows in April, reflecting the bleak outlook.
6. GDP is expected to contract by 4.0 per cent in FY2020 before rebounding by 5.0 per cent in FY2021. Growth in 2021 is expected to rise to 6.2 per cent, as forecast in April.
7. Hit hard by Covid-19, South Asia is forecast to contract by 3 per cent in 2020, compared to 4.1 per cent growth predicted in April.
8. ADB said that Growth prospects for 2021 are revised down to 4.9 per cent from 6 per cent.

New normal - 

1. Economies in Asia and the Pacific will continue to feel the blow of the Covid-19 pandemic this year even as lockdowns are slowly eased and select economic activities restart in a ‘new normal’ scenario.
2. The Covid-19 pandemic may see multiple waves of outbreaks in the coming period and sovereign debt and financial crises cannot be ruled out.
3. There is also the risk of renewed escalation in trade tensions between the United States and the People’s Republic of China (PRC).

Gloomy picture -  

1. RBI earlier in May projected a gloomy picture of the economy, saying the impact of Covid-19 is more severe than anticipated and the GDP growth during 2020-21 is likely to remain in the negative territory.
2. International rating agencies like Moody’s Investors Service, Fitch Rating and S&P Global Ratings have all predicted a 4-5 per cent contraction in India’s economic growth rate during April 2020 to March 2021 fiscal.

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