Published: Tue, September 15, 2020
Economy | By

India's Economy to Shrink by 9 Pc This Year: ADB

India's Economy to Shrink by 9 Pc This Year: ADB

"The economic threat posed by the Covid-19 pandemic remains potent, as extended first waves or recurring outbreaks could prompt further containment measures", Sawada said.

ADB economists say the developing economies in the Asia-Pacific region will contract by 0.7 percent.

"The downturn is across the board, with nearly three-fourths of regional economies projected to contract - the largest such share in the past 6 decades", the bank said in the latest update to its outlook.

The contraction would be the first since 1961, when growth was down 8 percent.

India's economic system is predicted to contract by 9 per cent this 12 months - worse than the 4 per cent contraction it had forecast three months in the past, the Asian Development Bank (ADB) mentioned on Tuesday. Growth will rally to 6.8% in 2021, in part because growth will be measured relative to a weak 2020. That will still leave next year's level of GDP below pre-coronavirus projections, implying that the recovery is only "partial" and "not full".

However, the bank lowered its growth outlook for the country next year from three-point-five percent to three-point-three percent.

ADB further predicts that inflation is expected to fall in the remainder of FY2020 to 4.5 percent with tamed food prices and decreased economic activity, and then further decline to 4.0 percent in FY2021.

China, where the virus first emerged late previous year before morphing into a pandemic that has infected more than 29 million people worldwide, was one of the few economies to buck the downward trend in the region.

Policies focused on protecting lives and livelihoods, and ensuring a safe return to work and restart of businesses, are crucial to ensuring a sustained recovery for the region, he said. To mitigate the risk, governments in the region have delivered wide-ranging policy responses, including policy support packages-mainly income support-amounting to $3.6 trillion, equivalent to about 15% of regional GDP. The rate is forecast at 6.8 percent, although the bank warns that a prolonged pandemic remains "the biggest downside risk". It is expected to grow by 1.8 per cent this year and 7.7 per cent in 2021 with successful public health measures providing a platform for growth.

ADB Country Director Manmohan Parkash said that recent economic performance in exports and remittances, and government's macroeconomic management including securing foreign funds for economic stimulus and social protection measures have made this recovery feasible. Some economies heavily reliant on trade and tourism, particularly in the Pacific and South Asia, face double-digit contractions this year. Forecasts suggest that most of developing Asia will recover next year, except for some economies in the Pacific including the Cook Islands, the Federated States of Micronesia, the Marshall Islands, Palau, Samoa, and Tonga.

Inflation is expected to moderate to 5.5 percent and current account deficit is likely to narrow to 1.1 percent of GDP in FY 2021.

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