The World Bank on Thursday said that India’s GDP is expected to contract by 9.6 percent this fiscal. The reason is the national lockdown and the income shock experienced by households and firms due to the COVID-19 pandemic. This evidently proves that the country’s economic situation is “much worse” than ever seen before.
“India’s GDP is expected to contract by 9.6% in the fiscal year that started in March,” the World Bank said on Thursday. Regional growth is projected to rebound to 4.5% in 2021, it said.
The Washington-based global lender, in its latest South Asia Economic Focus report ahead of the annual meeting of the World bank and International Monetary Fund, forecasts a sharper than expected economic slump across the region, with regional growth expected to contract by 7.7 per cent in 2020, after topping six per cent annually in the past five years.
World Bank said that India is facing an exceptional situation since the spread of the coronavirus and containment measures have severely disrupted supply and demand conditions in India.
There was a 25% decline in GDP in the second quarter of the year, which is the first quarter of the current fiscal year in India.
“The situation is much worse in India than we have ever seen before,” Hans Timmer, World Bank Chief Economist for South Asia told reporters during a conference call.
Factoring in population growth, however, income-per-capita in the region will remain 6 per cent below 2019 estimates, indicating that the expected rebound will not offset the lasting economic damage caused by the pandemic, it said.
Prime Minister Narendra Modi announced a nationwide lockdown from March 25 to contain the spread of Covid-19, which brought as much as 70% of economic activity, investment, exports, and discretionary consumption to a standstill. Only essential goods and services such as agriculture, mining, utility services, some financial and IT services and public services were allowed to operate.