According to the Asian Development Bank (ADB), it has projected that the gross domestic product (GDP) of India is going to strongly rebound by 11% in this particular fiscal year in 2021-22 ending on March 31, 2022. This is due to the continued economic recovery that has been boosted by increased public investment, a surge in domestic demand, and vaccine rollout. According to the forecast, it is assumed that there has been an extensive deployment of vaccines across the country and the second wave of the dreaded coronavirus disease pandemic is contained.
In the latest Asian Development Outlook (ADO) 2021, ADB based out of Manila has made forecasts about the projected economic growth of India to a moderate 7% in FY2022 as the base effects have disappeared. In FY2020, the economy is expected to have contracted by 8% in line with the second advance estimate made by the government.
Recently, IMF has estimated the Indian economy where they have said would grow by 12.5% in the current financial year.
Takeo Konishi, the ADB Country Director of India has said that the worst contraction is faced by the Indian economy in FY2020 because of the shock of Covid-19. With the ongoing vaccination drive and large government stimulus, the economic activity is expected to continue its recovery that will start from the third quarter of FY2020 and it is going to rebound strongly in the current financial year. This is going to create an uptick in domestic demand especially in the urban areas. The government is going to boost the public investment through its infrastructural push and will also provide incentives for manufacturing and also continued support to boost the rural incomes that can support the accelerated recovery by India.
The trajectory of the pandemic is uncertain because of the prolonged second wave. Even though there has been a vaccination push, it can also affect the economic normalization of India. However, the forecasts expect that the economic impact of the second wave is muted to an extent compared to the first wave that is in line with the global experience. Other downside risks include tightening the global financial conditions as there has been a fast recovery in the developed countries. This is going to apply pressure on the market interest rates of India according to ADB.
There has been a sharp surge in Covid-19 vaccination according to economists and the localized lockdowns are expected to hurt the growth as well as the economic recovery that is underway and it could slow down significantly.
The economic activity is going to recover and normalize backed by the government measures that are taken over the past year. It includes a large number of stimulus in FY2020 along with a steep increase in the capital expenditure budget in the FY2021 with an item of increased government expenditure on health care and water and also sanitation.