The positive report that India's economy is expected to grow by 8.3 per cent this fiscal year according to the World Bank is sure to bring cheers on the faces of economists and the establishment. This has in some way endorsed the official claims made that ours is the second-fastest-growing major economy.
The latest Bank's Regional Economic Update released on Thursday said that after the deadly second wave of Covid-19 in India, the pace of vaccination, which is expanding its base across the country, will determine economic prospects this year and beyond.
Importantly, the trajectory of the pandemic will cloud the outlook in the near-term until herd immunity is achieved, it cautioned. According to the Update issued ahead of the Bank's annual meeting next week, India' gross domestic product (GDP) — which shrank by 7.3 per cent (that is, a minus 7.3 per cent) under the onslaught of the pandemic last fiscal year — is expected to record the 8.3 per cent growth this fiscal year, which will moderate to 7.5 per cent next year and 6.5 per cent in 2023-24.
The report has also discussed trends among other major economises. China is ahead with its economy expected to grow by 8.5 per cent during the current calendar year after the Bank revised it upwards from the 8.1 per cent projection in April. The Bank said, The Covid-19 pandemic led India's economy into a deep contraction in FY 21 (fiscal year 2020-21) despite well-crafted fiscal and monetary policy support.
It said that growth recovered in the second half of the last fiscal year “driven primarily by investment and supported by unlocking' of the economy and targeted fiscal, monetary and regulatory measures. Manufacturing and construction growth recovered steadily.”
Although significantly more lives were lost during the second wave of the epidemic this year in India, compared to the first wave in 2020, “economic disruption was limited since restrictions were localised,” with the GDP growing by 20.1 per cent in the first quarter of the current fiscal year compared to the first quarter of 2020-21, the Update said. It attributed the spurt to “a significant base effect” (that is, coming off a very big fall in the compared quarter), “strong export growth and limited damage to domestic demand.” Looking ahead, the Bank's Update said that “successful implementation of agriculture and labour reforms would boost medium-term growth” while cautioning that “weakened household and firm balance sheets may constrain it.”
Taking stock of the pandemic's effects, the Bank said, “The toll of the crisis has not been equal, and the recovery so far is uneven, leaving behind the most vulnerable sections of the society – low-skilled, women, self-employed and small firms.” But it said that the Indian government has taken steps to strengthen social safety nets and ease structural supply constraints through agricultural and labour reforms deal with the inequality.
It said that the government continued investing in health programs “have started to address the weaknesses in health infrastructure and social safety nets (especially in the urban areas and the informal sector) exposed by the pandemic.”
It is a sigh of relief that despite facing the severe brunt of Covid first and second wave, India's recovery from suspected hit, will infuse further confidence among the corporate and the people that would undoubtedly accelerate the growth further in a more positive manner to prove it correct.
