ADB narrows India’s FY21 GDP contraction projection to 8%

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Asian lending agency cites faster-than-expected recovery, sees inflation at 5.8%.

  • The Asian Development Bank (ADB) 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. 
  • 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.
  • 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.
  • As a result, the ADB raised India’s inflation projection for the current fiscal to 5.8%, from 4.5%.
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