World Bank on Tuesday projected
India’s economy to grow at 8.3 per cent in 2021 and 7.5 per cent in 2022, even
as its recovery is being hampered by an unprecedented second wave of the
COVID-19, the largest outbreak in the world since the beginning of the deadly
pandemic.

The
Washington-based global lender, in its latest issue of Global Economic
Prospects released here, noted that in India, an enormous second COVID-19 wave
is undermining the sharper-than-expected rebound in activity seen during the
second half of Fiscal Year 2020/21, especially in services.

“India’s
recovery is being hampered by the largest outbreak of any country since the
beginning of the pandemic,” the World Bank said.

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In
2020, India’s economy is estimated to have contracted by 7.3 per cent while in
2019, it registered a growth rate of four per cent, the World Bank said, adding
that in 2023, India is expected to grow at 6.5 per cent.

In
its report, the Bank said that the global economy is set to expand by 5.6 per
cent in 2021 – its strongest post-recession pace in 80 years.

“For
India, GDP in fiscal year 2021/22 starting from April 2021 is expected to
expand 8.3 per cent,” it said.

Activity
will benefit from policy support, including higher spending on infrastructure,
rural development, and health, and a stronger-than expected recovery in
services and manufacturing, it said.

Although
the forecast has been revised up by 2.9 percentage points, it marks significant
expected economic damage from an enormous second COVID-19 wave and localised
mobility restrictions since March 2021, the report said.

Activity
is expected to follow the same, yet less pronounced, collapse and recovery seen
during the first wave, it said.

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“The
pandemic will undermine consumption and investment as confidence remains
depressed and balance sheets damaged. Growth in FY 2022/23 is expected to slow
to 7.5 per cent, reflecting lingering impacts of COVID-19 on household,
corporate and bank balance sheets; possibly low levels of consumer confidence;
and heightened uncertainty on job and income prospects,” it said.

According
to the World Bank, in India, the FY 2021/22 budget marked a significant policy
shift.

The
government announced that the health-related spending would more than double
and set out a revised medium-term fiscal path intended to address the economic
legacy of the pandemic.

Following
deteriorating pandemic-related developments, the Reserve Bank of India (RBI)
announced further measures to support liquidity provision to micro, small and
medium firms, and loosened regulatory requirements on the provisioning for
non-performing loans.

“In
India, fiscal policy shifted in the FY 2021/22 budget toward higher expenditure
targeted at healthcare and infrastructure to boost the post-pandemic recovery.
The renewed outbreak, however, may require further targeted policy support to
address the health and economic costs,” it added.

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On
March 31, the World Bank said India’s economy has bounced back amazingly from
the COVID-19 pandemic and nationwide lockdown over the last one year, but it is
not out of the woods yet.

It
had predicted that the country’s real GDP growth for fiscal year 21/22 could
range from 7.5 to 12.5 per cent in its latest South Asia Economic Focus report
released ahead of the annual Spring meeting of the World Bank and the
International Monetary Fund (IMF).

In
April and May, India struggled with the second wave of the COVID-19 pandemic
with more than 3,00,000 daily new cases. Hospitals were reeling under a
shortage of medical oxygen and beds.

In
mid-May, new coronavirus cases in India hit a record daily high with 4,12,262
new infections.

On
Tuesday, India reported less than one lakh new coronavirus infections after a
gap of 63 days, while the daily positivity rate dropped to 4.62 per cent.

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A
single day rise of 86,498 cases were registered, the lowest in 66 days, taking
the total tally of COVID-19 cases to 2,89,96,473.

The
COVID-19 death toll climbed to 3,51,309 with 2,123 daily deaths, the lowest in
47 days.