Notwithstanding the surge in the Covid 19 cases, India’s gross domestic product (GDP) will rebound strongly by 11.0 per cent 2021-22, the Asian Development Bank in its latest report – Asian Development Outlook said.
Economic recovery boosted by increased public investment, vaccine rollout, and a surge in domestic demand will push growth. Besides, a base effect—India is expected to contracted by 8 per cent in 2020-21—will also have an impact.
The ADB report projected India’s economic growth to moderate to 7.0 per cent in the next financial year as the base effects will taper.
The forecast assumes that vaccines are deployed extensively across the country and the second wave of the Covid 19 pandemic is contained, a statement issued by ADB said.
India is currently in the middle of a severe second wave of the pandemic. An uncertain pandemic trajectory with a prolonged second wave despite the vaccination push could affect India’s economic normalization, the report said. However, ADB said that the economic impact of the second wave is likely to be “relatively muted compared to the first wave in line with global experience.”
According to the report, economic activity will continue to normalize and recover, backed by government measures over the past year including a large stimulus package carved out. Besides, an increased government expenditure on health care, water, and sanitation will also strengthen the country’s resilience against future pandemics.
“India’s economy faced its worst contraction in FY2020 due to the COVID-19 shock. With large government stimulus and the ongoing vaccination drive, we expect economic activity will continue its recovery started from the third quarter of FY2020 and rebound strongly in the current fiscal year with an uptick in domestic demand, especially in urban services,” said ADB Country Director for India Takeo Konishi.
“The government’s boost to public investment through its infrastructure push, incentives for manufacturing, and continued support to boost rural incomes will support India’s accelerated recovery,” Konishi said.