New Delhi (NVI): The World Bank today said that India’s economy, the largest in South Asian region, is expected to contract by 9.6 per cent in the fiscal year (FY) that started in March 2020.
However, India’s growth is projected to rebound to 5.4 per cent in FY 22, mostly reflecting base effects, assuming COVID-related restrictions are completely lifted by 2022.
Furthermore, weak activity, domestically and abroad, is also likely to depress both Indian imports and exports, the Bank added.
Faced with an unprecedented downturn, India needs to continue with critical reforms to reverse the sudden and steep impacts of COVID-19 on its economy, the World Bank said in its regional update.
In its South Asia Economic Focus report, it forecasts a sharper than expected economic slump across the region, with regional growth expected to contract by 7.7 per cent in 2020, after topping 6 percent annually in the past five years.
The pandemic has also brought to the forefront new economic opportunities where digital technologies can play an essential role, providing new growth levers for South Asian countries, including India.
“The response of the Government of India to the COVID-19 outbreak was swift and comprehensive. The government implemented a national lockdown to contain the health emergency. This was followed by a comprehensive policy package to mitigate the impact on the poorest through various social protection measures as well as liquidity and financial support for small and medium enterprises. The World Bank is partnering with the government to strengthen policies, institutions, and investments for building back better,” World Bank Vice President for the South Asia Region, Hartwig Schafer said.
Three-quarters of all workers in South Asia depend on informal employment. While the poor have faced rising food prices, the COVID-19 crisis has also affected informal workers in the middle of the income distribution who experienced sharp drops in earnings, a release by the World Bank stated.
Informal workers are not generally covered by social insurance and few have savings or access to finance. Recognizing these challenges, India is reworking its social protection architecture to protect its workers, particularly informal sector workers, hit hard by the COVID-19 pandemi, the Bank added.
Junaid Ahmad, World Bank Country Director in India, said, “India is undertaking far-reaching reforms in its safety nets program. This will help the country to preserve its hard-won gains against poverty as nearly half of all households are vulnerable and the majority of the workforce lacks formal social security benefits. We are also encouraged by the recent amendments to India’s social security laws that will help provide coverage to groups of people who were earlier left out from government-assisted programs.”
“COVID-19 will profoundly transform South Asia for years to come and leave lasting scars in its economies. But there is a silver lining toward resilient recovery: the pandemic could spur innovations that improve South Asia’s future participation in global value chains, as its comparative advantage in tech services and niche tourism will likely be in higher demand as the global economy becomes more digital,” said Hans Timmer, World Bank Chief Economist for the South Asia Region.