NEW DELHI: The Asian Development Bank (ADB) on Thursday updated its forecast for the Indian economy, projecting an 8 percent contraction in 2020-21 compared to the previously estimated 9 percent decline due to a faster recovery than expected.
Noting that the economy has started to normalize, the Asian Development Outlook Supplement (ADO) said the second quarter contraction of 7.5% was better than expected.
The economy contracted 23.9 percent in the June quarter of the current fiscal year due to the impact of the coronavirus pandemic.
“The GDP forecast for FY2020 rises from a contraction of 9.0% to 8.0%, with GDP in the second half probably restored to its size from the previous year. The growth projection for FY2021 remains at 8.0%” said.
Highlighting that India is recovering faster than expected, the report said South Asia’s previous forecast of a 6.8 percent contraction was raised to (-) 6.1 percent in line with an improved projection for India.
Growth will return in 2021-22, with 7.2% in South Asia and 8% in India, it added.
Earlier this month, the Governor of the Reserve Bank, Shaktikanta Das, had said that the economy is recovering faster than expected and that the growth rate is likely to be positive in the second half of the current financial year.
For the year as a whole, the economy is likely to contract by 7.5 percent, which is an improvement over the Reserve Bank’s previous projection of a 9.5 percent contraction, it had said. Das when presenting the bi-monthly review of monetary policy.
Noting that growth prospects have improved with progress on the vaccine front, Das said, the economy is likely to see growth of 0.1 percent in the third quarter and 0.7 percent in the fourth. trimester.
Regarding inflation, ADO said, it is expected to decline in the coming months, and the update projection of 4 percent for 2021-22 remains.
In India, supply chain disruption brought food inflation to an average of 9.1 percent in the first 7 months of 2020-21, bringing headline inflation to 6.9 percent in the same period, he said.
As a result, ADO revised India’s inflation from 4.5 percent to 5.8 percent for the current fiscal year.