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India may lose fastest-growing big economy tag to PRC: WB

Jun '20
Pic: Shutterstock
Pic: Shutterstock
The World Bank (WB) recently projected a 3.2 per cent contraction for India in fiscal 2020-21 due to the COVID-19-induced lockdown. It had earlier predicted 1.5-2.8 per cent growth for India, which could also lose the tag of the fastest-growing large economy to China for two years. China is projected to grow at 1 per cent in calendar year (CY) 2020, and 6.9 per cent in 2021.

“Stringent measures to restrict the spread of the virus, which heavily curtail short-term activity, will contribute to the contraction,” the bank said in its Global Economic Prospect.

India’s economy grew 4.2 per cent in 2019-20, the slowest in 11 years. The bank, however, stressed India’s economy should bounce back in 2021-22 and pegged growth at 3.1 per cent. Still, it is lower than 4-5 per cent growth projected by the bank earlier.

The bank also sharply cut its 2020 forecast for the world economy—5.2 per cent contraction, as against 2.5 per cent growth projected in January.

If this comes true, the contraction will be the deepest global recession in eight decades, despite unprecedented policy support.

The World Bank said spillovers from weaker global growth and balance-sheet stress in the financial sector will also weigh on activity, despite some support from the fiscal stimulus and continued monetary policy easing.

According to the report, India’s central bank has been purchasing government bonds to further ease the financial conditions.

Fibre2Fashion News Desk (DS)

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June 2021

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