The Indian economy hit hard by the COVID-19 epidemic will shrink 4% during the current financial year, the Asian Development Bank (ADB) said, adding that countries in ‘Developing Asia’ will ‘barely grow’ this year. The ADB forecast this scenario in a supplement to its Asian Development Outlook (ADO) on 18 June.
China, though expected to record positive growth, will fatten just 1.8% this year, sharply down from 6.1% in 2019, ADB said.
The lender said the growth in Indian GDP had slowed to 3.1% in the last quarter — its slowest since early 2003. Economic growth slowed to 4.2% in the whole of the last fiscal year as both exports and investment started to contract. “High-frequency indicators such as purchasing managers’ indexes fell to all-time lows in April, reflecting the bleak outlook. Migrant workers have gone home to their villages after losing their jobs in the cities and will be slow to return even after containment measures are relaxed. GDP is expected to contract by 4% in FY2020 before rebounding by 5% in FY2021,” it said.
ADB, in its annual flagship ADO published on 3 April, had projected that India’s economic growth rate would slip to 4% in the current fiscal owing to the global COVID-19 pandemic.
‘Developing Asia’ will barely grow in 2020, as containment measures to address the coronavirus disease COVID-19 pandemic would hamper economic activity and weaken external demand, the ADB said. For the countries in developing Asia, ADB forecasts growth of 0.1% in 2020 — down from the 2.2% forecast in April — and would be the slowest growth for the region since 1961.
However, while the situation in the country is difficult, it is expected to improve soon, say other agencies. Two of the world’s largest agencies have made this prediction about the Indian economy. Both have said that the GDP growth rate will start accelerating this year, with the impact of coronavirus decreasing later in 2020.
In the next two years — that is by 2022 — India’s growth rate will be between 8.5% to 9.5%. The largest rating agencies internationally, Fitch and S&P, had drawn some flak in India for their predictions in the last week where the economy of the country they had said would shrink up to 5%.