World Bank raises India growth projection by 4.7
percentage points for FY22
The World Bank has scaled up its projection for India's economic growth by 4.7
percentage points to 10.1 per cent for Financial Year 2021-22, citing a strong rebound in
private consumption and investment growth.
The report, 'South Asia Economic Focus, Spring 2021, South Asia Vaccinates', also
forecast the economy to decline by 8.5 per cent in FY 2021, higher than eight per cent
projected by India’s National Statistical office.
Considering the uncertainty in 2021-22, the Bank also gave a range of economic growth
for India: 7.5 to 12.5 per cent.
"Given the significant uncertainty pertaining to both epidemiological and policy
developments, real GDP growth for FY'22 can range from 7.5 to 12.5 percent,
depending on how the ongoing vaccination campaign proceeds, whether new
restrictions to mobility are required, and how quickly the world economy recovers," it
Over the medium-term, growth is projected to stabilise within a 6-7 percent range. The
report said public consumption will contribute positively, but pent-up private demand is
expected to fade by the end of 2021. Investment will pick up gradually, spurred by a
large government capital expenditure push.
Negative spillovers from financial sector distress, especially as forbearance measures
expire, remain a risk to the growth outlook. Nonetheless, the Reserve Bank of India’s
liquidity stance is also expected to remain accommodative during the fiscal year ending
in March 2022.
As economic activity normalizes, domestically and in key export markets, India's current
account is expected to return to mild deficits (around one per cent in FY22 and FY23)
and capital inflows to be buoyed by continued accommodative monetary policy and
abundant international liquidity conditions.
The shock from Covid-19 will lead to a long-lasting inflexion in India’s fiscal trajectory.
"The general government deficit is expected to remain above 10 per cent of GD