The World Bank on Thursday projected a steeper contraction in India's economy by 9.6 per cent this fiscal in light of COVID-19 pandemic and subsequent lockdowns. The global agency noted that the country's economic situation is "much worse" than ever seen before.
The Washington-based global lender said that the downgrade in India's GDP is reflective of the nationwide lockdown and the income shock experienced by households and firms due to the coronavirus pandemic.
"India's GDP is expected to contract by 9.6 per cent in the fiscal year that started in March," the World Bank said in its South Asia economic focus report. Regional growth is projected to rebound to 4.5 per cent in 2021, it said.
The World Bank predicted a sharper than expected economic slump across the region. It expects regional growth to contract by 7.7 per cent in 2020, after topping six per cent annually in the past five years.
Factoring in population growth, however, income-per-capita in the region will remain 6 per cent below 2019 estimates, indicating that the expected rebound will not offset the lasting economic damage caused by the pandemic, the World Bank said.
"The situation is much worse in India than we have ever seen before," Hans Timmer, World Bank Chief Economist for South Asia said.
"It is an exceptional situation in India. A very dire outlook," he said.
Most of the global rating agency, including Moody's, Fitch and Goldman Sachs, have forecasted a double-digit contraction in India's gross domestic product (GDP) growth for the current financial year 2020-21 (FY21) after Indian economy fell sharply by 23.9 per cent during the first quarter of the current fiscal due to lockdown imposed to limit the spread of the coronavirus. Moody's on Friday lowered India's growth estimates for the current fiscal to (-) 11.5 per cent, from (-) 4 per cent estimated earlier.
While Fitch expects India's GDP to contract by 10.5 per cent in FY21 versus its earlier estimate of 5 per cent contraction, Goldman Sachs has pegged negative GDP growth of 14.8 per cent against its previous estimate of 11.8 per cent contraction in this period.
By Chitranjan Kumar