India’s economy is projected to grow at 11 per cent in the current fiscal and 7 per cent in the next, the Asian Development Bank said on Wednesday.
A stimulus-fuelled surge in the US, India’s largest export market, will support the revival, the bank said, but warned that the severe second COVID-19 wave currently engulfing large parts of the country is threatening the recovery.
“India’s growth rate will rise sharply this year and moderate in 2022. Growth is forecast at 11 per cent in 2021 before settling at 7 per cent in 2022. The strong recovery is being driven by an economy normalising from last year’s deep contraction — and this will be backed by a large COVID-19 vaccine rollout,” ADB said in its flagship Asian Development Outlook (ADO) 2021.
“A sharp increase in capital expenditure and accommodative financial policies will also support the rebound. Rising demand in the US supported by the fiscal stimulus package will help India’s growth, as the US is its largest export market. But India’s COVID-19 cases have resurged since February 2021, and if not controlled, they present a considerable downside risk to the recovery,” the report said.
The GDP of South Asia is expected to rebound to 9.5 per cent this year, following a contraction of 6 per cent in 2020, before moderating to 6.6 per cent next year (2022), ADB said.
ADB said economic growth in developing Asia is set to rebound to 7.3 per cent this year, supported by a healthy global recovery and an early progress on COVID-19 vaccines. The projected resurgence follows a 0.2 per cent contraction last year.
“The region’s growth is forecast to moderate to 5.3 per cent in 2022. Excluding the newly industrialised economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei, China, developing Asia’s economic activity is expected to grow 7.7 per cent this year and 5.6 per cent in 2022,” the report said.
The report projects that most economies in developing Asia will see healthy growth this year and in 2022.
Developing Asia comprises 46 members of ADB list on the basis of geographic group. These include new industrialised economies, countries in Central Asia, East Asia, South Asia, Southeast Asia and the Pacific.
The report said in China, strong exports and a gradual recovery in household consumption will boost economic activity this year.
China’s GDP is forecast to expand 8.1 per cent in 2021 and 5.5 per cent in 2022. East Asia’s GDP is expected to grow 7.4 per cent in 2021 and 5.1 per cent in 2022, the report said.
The report said rising exports are boosting some economies in Developing Asia amid strengthening global economic activity, including a rebound in manufacturing.
Progress on the production and delivery of COVID-19 vaccines has contributed to this momentum, but the pandemic remains the biggest risk for the region as potential delays in vaccine rollouts or significant new outbreaks could undermine growth.
Increasing geopolitical tensions, production bottlenecks, financial turmoil from tightening financial conditions, and long-term scarring like learning losses due to school closures are among other risk factors, said the report.
– With inputs from PTI