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New Delhi: The Asian Development Bank (ADB) has slashed India’s growth projections by one percentage point to 10 per cent for the current fiscal, mainly due to disruption in economic activity due to the second wave of the COVID-19 pandemic.
In April, ADB projected a growth rate of 11 per cent for India in 2021-22.
In its update to the Asian Development Outlook (ADO) released on Wednesday, the multilateral lending agency has cut Asia’s growth forecast for 2021 from 7.3 per cent to 7.1 per cent, though it retained China’s growth projections. 8.1 percent.
“India’s growth forecast for FY 2021 (ending March 2022) has been revised as May’s spike in COVID-19 impacted the recovery. However, the outbreak spread faster than anticipated, resulting in several states easing lockdown measures and returning to more normal travel patterns,” said ADO Update (ADOU) 2021.
ADB said the economy is expected to return strongly in the remaining three quarters of fiscal year 2012, before rising to 7.5 percent in fiscal year 2012 (the fiscal year ending March 2023), before rising to 7.5 percent. There will be an increase of 10 percent in the whole financial year.
The Reserve Bank of India (RBI) also lowered India’s economic growth forecast by a similar margin to 9.5 per cent in June this year.
The forecast for the 12 months ending March 31, 2022, takes into account the disruption in economic activity due to the second wave of the coronavirus disease (COVID-19) pandemic, which has adversely affected services, household consumption and the urban informal sector, ADB said. made an impact. said.
As consumption will recover gradually, government spending and exports will contribute more in FY21 than in the previous fiscal, it said.
“The Indian economy is showing encouraging signs of recovery as the effects of the second wave wear off. The government’s vaccination campaign, its new fiscal stimulus package, and initiatives to free up more resources for infrastructure development as well as measures to strengthen health interventions are helping accelerate the recovery. Takeo Konishi, ADB Country Director for India, said.
Regarding South Asia, which includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, the update said the outlook varies across the subregion.
“The sub-sector is projected to expand more slowly this year than previously estimated, but faster next year. While India runs the forecast, growth rates will vary across economies. Also for India, this update will help Bangladesh and Bangladesh. revises forecasts for 2021 for Nepal, both grappling with another resurgence in COVID-19 cases.
However, China will remain strong despite a prolonged recovery in domestic consumption. According to ADB’s estimate of China, “GDP growth forecast in the form of higher export performance and higher fiscal support in the second half of 2021 remains unchanged at 8.1 percent in 2021 and 5.5 percent in 2022.”
Even as cases of COVID-19 rise in China, consumption is expected to continue to recover gradually, supported by an improving job market and consumer confidence.
The contribution of net exports and investment to China’s growth, supported by healthy trade dynamics, is expected to increase this year as well, before declining in 2022, it further said.
ADB said the pandemic continues to boost Asia’s economic prospects, despite a revival in export demand and global demand.
“The renewed COVID-19 outbreak since July is slowing the pace of development in some parts of the region. The recovery has been weak in economies hit by domestic outbreaks and those facing weak demand from their core industries such as economies dependent on tourism,” the ADB said.
ADB has 46 members in developing Asia.
The rebound in developing Asia is expected to be slightly weaker than ADO 2021 forecast. It said regional GDP is expected to grow by 7.1 per cent this year, a slight decline from the earlier estimate of 7.3 per cent.
“Regional growth this year will be characterized by slower-than-expected expansion in South Asia and Southeast Asia, a slight contraction in the Pacific, and a rapid recovery in East Asia and Central Asia.”
ADB said strong growth in advanced economies will continue to support the recovery in global trade.
According to the update, “rapid vaccine rollouts in these economies have reduced the incidence of severe cases, hospitalizations, and deaths during the resurgence of COVID-19 infections.”
Growth in the US, the euro area and Japan will remain strong in 2022 and GDP is expected to grow at an average of 3.9 per cent.
On the price front, ADB said rising energy and food prices as well as exchange rate depreciation have driven inflation in some economies in Asia.
“But it is nevertheless close to the target of central banks across the region except Central Asia. Against this background, fiscal and monetary policies remain consistent and the financial position remains strong,” ADOU 2021 said.
The Reserve Bank of India has forecast retail inflation at 5.7 per cent for the current fiscal on account of supply side constraints, firming crude oil prices and higher raw material cost. RBI takes retail inflation as an important input for deciding its monetary policy every two months.
read also: Sustainable development requires more investment in healthcare, infrastructure: Shaktikanta Das
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