The Asian Development Bank (ADB) on Thursday upgraded its forecast for the Indian economy, projecting 8% contraction in 2020-21 as compared to 9% estimated earlier, on the back of a faster-than-expected recovery.
Observing that the economy had begun to normalise, the Asian Development Outlook (ADO) Supplement said the second quarter contraction at 7.5% was better-than-expected.
The economy contracted by 23.9% in the June quarter on account of the impact of the COVID-19s pandemic.
“The GDP forecast... is upgraded from 9.0% contraction to 8.0%, with GDP in H2 probably restored to its size a year earlier,” the ADB said. It retained its growth projection for the next fiscal at 8%.
Highlighting that India was recovering more rapidly than expected, the ADB said the earlier South Asia forecast of 6.8% contraction was upgraded to (-)6.1% in line with an improved projection for India.
South Asia to rebound
Growth will return in 2021-22, at 7.2% in South Asia, the Asian lender added.
Earlier this month, Reserve Bank of India (RBI) Governor Shaktikanta Das had said the economy was recuperating faster than anticipated and that the growth rate was likely to turn positive in the second half of the current financial year.
Inflation, the ADB said, was expected to ease in the coming months, and maintained the 4% projection for 2021-22.
Supply chain disruptions had taken food inflation to an average of 9.1% in the first 7 months of 2020-21, pushing headline inflation to 6.9% in the same period, the regional lender said.
As a result, the ADB raised India’s inflation projection for the current fiscal to 5.8%, from 4.5%.
