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Global economy projected to expand 5.6 pc in 2021, India to grow at a robust 8.3% despite COVID-19 challenges: World Bank

Tue, 08 Jun 2021   |  Reading Time: 2 minutes

Despite challenges from the Covid-19 pandemic, the global economy is expected to remain strong and expand 5.6 per cent in 2021, the fastest post-recession pace in 80 years relying on strong rebounds from a few major economies, the World Bank said on Tuesday. In its June 2021 report on Global Economic Prospects, the World Bank said that despite the recovery, many emerging markets and developing economies continue to struggle with the Covid-19 pandemic and its aftermath. The global output will be about 2 per cent below pre-pandemic projections by the end of this year and per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies the World Bank noted.

For India, GDP in fiscal year 2021/22, starting April 2021, is expected to expand 8.3 percent. Activity will benefit from policy support, including higher spending on infrastructure, rural development, and health, and a stronger-than expected recovery in services and manufacturing. Although the forecast has been revised up by 2.9 percentage points, this masks significant expected economic damage from an enormous second COVID-19 wave and localized mobility restrictions since March 2021. Activity is expected to follow the same, yet less pronounced, collapse and recovery seen during the first wave. The pandemic will undermine consumption and investment as confidence remains depressed and balance sheets damaged. Growth in FY2022/23 is expected to slow to 7.5 percent reflecting lingering impacts of COVID-19 on household, corporate and bank balance sheets; possibly low levels of consumer confidence; and heightened uncertainty
on job and income prospects. In the region excluding India, the recovery is expected to be weaker than its historical growth average.

In India, the FY2021/22 budget marked a significant policy shift. The government announced health-related spending would more
than double and set out a revised medium-term fiscal path intended to address the economic legacy of the pandemic. Following deteriorating
pandemic-related developments, the Reserve Bank of India announced further measures to support  liquidity provision to micro, small, and medium firms and loosened regulatory requirements on the provisioning for nonperforming loans. Debt relief under the Debt Service Suspension Initiative has been extended to December 2021 and will provide additional fiscal space for Afghanistan, Maldives, Nepal, and Pakistan. Pakistan is expected to grow 1.3% in FY 2020/21 as improving remittance flows and a rebound in confidence are offset
by contracting investment and fiscal consolidation.

“While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world,” World Bank Group President David Malpass said. The United States’ growth is projected to reach 6.8 per cent this year, reflecting large-scale fiscal support and the easing of the pandemic restrictions. Among developing economies, China is anticipated to rebound to 8.5 per cent this year, reflecting the release of pent-up demand.

(ANI & World Bank)

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