ADB sees Indian economy shrinking 4% in FY21 after growth call earlier

IMF remains only major outlier predicting growth for the economy, is likely to be on same page with others next week

The Asian Development Bank (ADB) on Thursday projected India’s economy to contract by 4 per cent in the current financial year against its earlier prediction of a growth of 4 per cent, as measures to contain the spread of Covid-19 significantly disrupted activities.

“GDP is expected to contract by 4 per cent in FY21 before rebounding by 5 per cent in FY22,” ADB said in its Asian Development Outlook Supplement. 

With this, the International Monetary Fund (IMF) remains the only major outlier which has projected India’s economy to grow by 1.9 per cent. However, the Fund is likely to revise down this projection significantly next week. 

ADB said growth in Indian GDP fell to 3.1 per cent in the last quarter of 2019-20, its slowest since early 2003. 

 

 

Economic growth slowed to 4.2 per cent in the entire FY20 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, ADB pointed out. 

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, ADB said. 

The Manila-based Bank said fuel prices in India softened in May, but food inflation stayed elevated at 7.4 per cent year-on-year as supply faltered.