Pedestrians and shoppers walk past stores near Crawford market in Mumbai.(Bloomberg)
India’s economic growth is likely to range between 1.5% and 4% in FY21, depending on the severity of the spread of covid-19 pandemic and the duration of the ongoing nationwide lockdown, the World Bank said on Sunday.
“If a large-scale domestic contagion scenario is avoided, early policy measures pay off, and restrictions to the mobility of goods and people can be lifted swiftly, an upside scenario could materialise in FY21, with growth around 4%. However, if domestic contagion is not contained, and the nationwide shutdown is extended, growth projections could be revised downwards to 1.5%, and fiscal slippages would be larger,” the Bank said in its South Asia Economic Focus.
The Bank said the severe disruption to economic activity by the covid-19 outbreak comes after already disappointing growth rates in previous years. Most economists are now certain that the economy will miss the 5% FY20 growth estimated by the statistics department. “The green shoots of a rebound that were observable at the end of 2019 have been overtaken by the negative impacts of the global crisis,” the Bank added.
Goldman Sachs last week had projected the bleakest FY21 growth forecast for India at 1.6%, holding that the spread of covid-19, nationwide shutdown, social distancing measures and fears among consumers and businesses may lead to a significant contraction in economic activity.
The resulting domestic supply and demand disruptions on the back of weak external demand are expected to result in a sharp growth deceleration in FY21, to 2.8% in a baseline scenario, the World Bank said. “The services sector will be particularly impacted. A revival in domestic investment is likely to be delayed given enhanced risk aversion on a global scale, and renewed concerns about financial sector resilience. Growth is expected to rebound to 5% in FY22 as the impact of covid-19 dissipates, and fiscal and monetary policy support pays off with a lag.”