Economy to Shrink 4% in FY21- ADB Forecast
- The coronavirus pandemic, the Indian economy is expected to contract by 4 per cent during the current financial year, the ADB said in a supplement to its Asian Development Outlook (ADO) on Thursday.
- Countries in Developing Asia will “barely grow” in 2020, as per the ADB forecast. “Growth in Indian GDP slowed to 3.1 per cent in the last quarter of fiscal year 2019 (FY2019, ended 31 March 2020), its slowest since early 2003. Economic growth slowed to 4.2 per cent in the whole of FY2019 as both exports and investment started to contract.
- “High-frequency indicators such as purchasing managers’ indexes fell to all-time lows in April, reflecting the bleak outlook. Migrant workers have gone home to their villages after losing their jobs in the cities and will be slow to return even after containment measures are relaxed. GDP is expected to contract by 4.0 per cent in FY2020 before rebounding by 5.0 per cent in FY2021,”it said.
- In its annual flagship ADO published on April 3, ADB had projected that India’s economic growth rate will slip to 4 per cent in the current fiscal on account of the global health emergency created by the COVID-19 pandemic.
- Developing Asia will barely grow in 2020, as containment measures to address the coronavirus disease (COVID-19) pandemic is expected to hamper economic activity and weaken external demand, ADB said.
- For the countries in developing Asia, ADB forecasts growth of 0.1 per cent for the region in 2020. This is down from the 2.2 per cent forecast in April and would be the slowest growth for the region since 1961, it said.
- “Growth in 2021 is expected to rise to 6.2 per cent, as forecast in April. Gross domestic product (GDP) levels in 2021 will remain below what had been envisioned and below pre-crisis trends.”
- The Reserve Bank of India (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.
- However, RBI has not given any number to the projected contraction of the Indian economy. The outlook of inflation also remains “highly uncertain”, RBI Governor Shaktikanta Das had said on May 22, while announcing a 40-basis point cut in the repo rate as part of the monetary measures to deal with the current crisis.
- Earlier this month, Washington headquartered World Bank projected India’s economy to shrink by 3.2 per cent in the current fiscal due to the coronavirus pandemic that has hit a hard blow to the economy due to the lockdown.
- 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. Crisil has said this would be the country’s fourth recession since Independence, first since liberalisation, and perhaps the worst to date.
The Asian Development Bank is a regional development bank established on 19 December 1966, which is headquartered in the Ortigas Center located in the city of Mandaluyong, Metro Manila, Philippines. The company also maintains 31 field offices around the world to promote social and economic development in Asia.
- Founded – 19th December 1966
- Headquarters – Mandaluyong, Philippines
- President– Masatsugu Asakawa
- Membership– 68 Countries
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