The Asian Development Bank on Friday reduced its growth forecast for India for the financial year of 2020-’21, saying it is likely to slow down to 4% amid the global economic meltdown triggered by the coronavirus pandemic, PTI reported. Last year, the bank had downgraded its projection for India’s economic growth in the ongoing financial year from 7.2% to 6.5%.

The forecast assumes that the pandemic “dissipates and full economic activity resumes” from July-September quarter, the ADB said.

In its Asian Development Outlook, the bank predicted that India’s Gross Domestic Product growth will slow down before it strengthens to 6.2% in 2021. Growth in India will remain subdued after the country suffered a sharp slowdown last year, as a credit crunch that originated in the non-banking financial sector severely hampered bank lending, the ADB said.

“We face extraordinarily challenging times,” President of Asian Development Bank Masatsugu Asakawa said. “The outbreak of coronavirus is disrupting people’s lives and interrupting business and other economic activities around the world.”

The bank said measures taken to contain the coronavirus in the backdrop of a weak global environment will be a severe economic whiplash that will offset support from corporates. It will also result in financial sector reforms meant to revive credit flows, as well as personal income tax cuts.

On a macroscopic level, the South Asian region will face a milder economic slowdown, the bank predicted. “Growth in South Asia will decelerate to 4.1% this year and then recover to 6% in 2021, largely tracking the trend in the dominant Indian economy,” it said.

The bank outlook said that economic growth in the Asia Pacific region is expected to dip sharply to 2.2% this year under the current health crisis. It will then rebound to 6.2% in 2021, it added.

The pandemic will have devastating impacts on the economies of developing countries in Asia because of the region’s deep integration with the global economy through channels of trade, tourism and remittances, the bank said. It added that the plummeting prices of commodities will severely burden some countries.

Globally, the pandemic could cost the economy $4.1 trillion, the ADB said. “The estimated impact could be an underestimate, as additional channels such as...possible social and financial crises, and long-term effects on health care and education are excluded from the analysis,” the ADB said. A shorter containment period could reduce the losses to $2 trillion, it added.

The global economic meltdown triggered by the pandemic comes at a time when confidence in the Indian economy is giving way to uncertainty because of the continued slump in manufacturing. India’s economic growth slipped to a nearly seven-year low of 4.7% in the October-December, according to government data.

Last month, American credit rating agency Fitch Ratings’ company India Ratings and Research revised its growth forecast for India in the 2020-’21 financial year to 5.1%, saying a crisis is likely to envelop the economy as the coronavirus pandemic continues to hit investments and exports globally.