India’s growth for FY 2021/22, which began in April 2021, is forecast at 8.3%, supported by plans for higher spending on infrastructure, rural development, and health, and a stronger-than-expected recovery in services, the World Bank said.
“Better growth prospects since January, however, masks significant damage to economic activity from COVID19. The economy is expected to follow the same, yet less pronounced, collapse and recovery seen during the first wave. Growth in FY 2022/23 is expected to slow to 7.5%,” it said in its latest report on the global economy, which pointed out that developing countries were battling with the lasting impact of the Covid-19 pandemic.
COVID-19 cases have surged in South Asia and the situation in India has been particularly difficult. For the region, peaks in daily new confirmed cases and deaths are multiple times higher than last year. Progress in vaccination has been slow, and the largest economies, Bangladesh, India, and Pakistan, have vaccinated only a small fraction of their populations, the Bank said.
“In India, an enormous second COVID-19 wave is undermining the rebound in services and manufacturing activity. High frequency data, including a renewed drop in foot traffic around work and retail spaces, suggests that activity is again collapsing,” it added.
South Asian forecast
- In Bangladesh, the recovery is expected to be gradual, with growth of 3.6% in FY 2020/21, which starts in July, and 5.1% in FY 2021/22, as private consumption is supported by normalizing activity, moderate inflation, and rising garment exports.
- Pakistan is expected to grow 1.3% in FY 2020/21 as improving remittance flows and a rebound in confidence are offset by contracting investment and fiscal consolidation.
The Bank said the pandemic is expected to leave a legacy of higher poverty in the region. Tens of millions of people are anticipated to fall below the $1.90-a-day extreme poverty line this year.
“Further deprivation could come from higher food prices as global agricultural commodities have risen 30% over the past year. Adding to the adverse impacts, fixed investment is expected to be 10% below pre-pandemic trends, schools have been shut for about one-third of the duration of the pandemic, and an estimated one-tenth of labour hours have been lost. Risks: With the recovery in early stages and the pandemic continuing to spread, the outlook is highly uncertain,” it added.