The World Bank on Monday said that the Indian economy will contract by 3.2% in the financial year of 2020-’21 because of the lockdown to control the coronavirus pandemic. The bank had in January lowered its projection for India’s economic growth from 6% to 5% in 2019-’20 fiscal year, but said it would recover to 5.8% in the following year.
“In India, growth is estimated to have slowed to 4.2% in the fiscal year 2019/20 and output is projected to contract by 3.2% in fiscal year 2020/21, when the impact of COVID-19 will largely materialise,” the World Bank said in the latest edition of the Global Economic Prospect. “Stringent measures to restrict the spread of the virus, which heavily curtail short-term activity, will contribute to the contraction.”
The World Bank said that the global economy will witness the worst depression since the Second World War. “The swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction,” the World Bank said in its report. “The global economy will shrink by 5.2% this year. That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870.”
The World Bank joined a growing list of agencies that have downgraded India’s growth forecasts for the current financial year. In May, credit rating agency Moody’s Investors Service said it estimated India’s Gross Domestic Product growth to “hit zero” in the 2020-’21 financial year due to the lockdown to combat the coronavirus pandemic. In the same month, American credit rating agency Fitch Ratings forecast that the Indian economy will contract by 5% during 2020-’21.
India’s economic growth rate stood at 3.1% for the fourth quarter of 2019-’20, according to data the government released last month. In the October to December 2019 quarter, the country’s economic growth stood at 4.7% – a seven-year low. However, the final figures released for the third quarter on Friday showed that India’s GDP grew at 4.1% during October to December last year.
With the latest phase of the lockdown, dubbed “Unlock 1”, the Centre is hoping to ease weeks of restrictions in a phased manner. The number of coronavirus cases in India rose to 2.56 lakh on Monday and the toll went up to 7,200. India is now the fifth worst-affected country in the world. Despite the spurt in coronavirus cases, restaurants, malls and places of worship reopened in most parts of India on Monday.