The World Bank has raised the country's growth forecast to 10.1 per cent for the next financial year 2021-22 starting Friday, April 1, compared to the earlier estimate of 5.4 per cent. The World Bank stated in its recent report 'South Asia Economic Focus' that the Indian economy had been slowing prior to the COVID-19 pandemic. After reaching 8.3 per cent in the financial year 2016-17, the growth decelerated to four per cent in the financial year 2019-20 and the economic slowdown was caused by a decline in private consumption growth and subsequent shocks to the financial sector.
The World Bank in its report said that given the significant uncertainty pertaining to both epidemiological and policy developments, the real GDP growth for the next financial year can range between 7.5 per cent-12.5 per cent, depending on the ongoing vaccination drive, and whether new restrictions to mobility will be required.
The COVID-19 impact will lead to a long-lasting change in the country's fiscal trajectory. The general government deficit is expected to remain above 10 per cent of GDP until fiscal year 2020-22. As a result, the public debt is projected to peak at almost 90 per cent of GDP in the financial year 2020-21, before declining gradually thereafter.
Earlier this year in January, the International Monetary Fund (IMF) projected an 11.5 per cent growth rate for India in 2021, making the country the only major economy in the world to register double-digit growth this year amid the COVID-19 pandemic.
The economy snapped out of a technical recession after two consecutive quarters of de-growth as the GDP growth expanded by 0.4 per cent in the third quarter of the financial year, as against a contraction of 7.3 per cent in the September quarter.
India is among the few major economies to post growth in the last quarter of 2020. However, the recent resurgence in COVID-19 cases in few areas of the country may impact the economy, given the inverse relationship between economic growth and a fall in COVID-19 infections.