The Asian Development Bank (ADB) has forecast that India’s gross domestic product (GDP) will rebound sharply by 11% in 2021-2022 due to the continued economic recovery spurred by increased public investment, the vaccine deployment and surging domestic demand.
The forecast, which appeared in its publication titled “Asian Development Outlook 2021,” assumed that would happen once vaccines are widely deployed across the country and the second wave of the coronavirus pandemic (COVID-19) will be contained.
The AfDB has also predicted that the country’s economic growth will decline to 7% in 2022-2023, with base effects disappearing. The economy is expected to contract by 8% in 2020-2021, in line with the government’s second advance estimate.
“The Indian economy experienced its worst contraction in 2020-2021 due to the COVID-19 shock. With a strong government stimulus and the vaccination campaign underway, we expect economic activity to continue its recovery that began in the third quarter of 2020-2021 and rebound strongly during the current fiscal year with an increase in domestic demand, in particularly in urban services, ”AfDB said. Country Director for India Takeo Konishi.
“Stimulation of public investment by the government through its infrastructure efforts, manufacturing incentives and continued support to increase rural incomes will support India’s accelerated recovery,” he added.
At the same time, forecasts indicated that an uncertain pandemic trajectory with a prolonged second wave despite the vaccination surge could affect India’s economic normalization.
He also expects the economic impact of the second wave to be relatively moderate compared to the first wave, in line with global experience. Other downside risks include further tightening in global financial conditions due to a rapid recovery in developed countries, which would put pressure on Indian market interest rates.
Predicting a positive picture, AfDB forecasts indicated that economic activity would continue to normalize and recover, supported by government measures over the past year, including a strong recovery in the previous fiscal year and a sharp increase in the capital expenditure budget in 2021-22.
The increase in public spending on health care, water and sanitation will also strengthen the country’s resilience in the face of future pandemics, according to AfDB forecasts.