The World Bank has retained its June forecast for India’s Gross Domestic Product (GDP) to grow by 8.3% in the current fiscal year, with the economy seen supported by an increase in public investment to bolster domestic demand and schemes like the production-linked incentive to boost manufacturing.
Despite the ravages of the second COVID-19 wave, the economic impact of the pandemic had been “relatively small” this year compared with the hit in 2020, the bank said in a South Asia-focussed report titled ‘Shifting Gears: Digitization and Services-Led Development’ ahead of its annual meetings, which start next week in Washington.
“Over the next two years, as the base effect fades, growth is expected to stabilise at around 7%, aided by structural reforms to ease supply-side constraints and infrastructure investment,” the multilateral lender said referencing last fiscal’s 7.3% GDP contraction. Downside risks in the medium term include uncertainty around asset quality deterioration due to the pandemic, slow recovery in the informal sector and higher-than-expected inflation, the bank said.
Noting that accommodative fiscal and monetary policies globally had been key to mitigating the pandemic’s economic impact, the bank said it was time to start rethinking policies.
“If you don't start now preparing for what we call the ‘new normal’, and there’s always a new normal after a major crisis, you might well be too late,” said Chief Economist for South Asia Hans Timmer.
Learning from the crisis meant building social protection and adopting greener policies, he added.