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The Asian Development Bank (Bloomberg)
The Asian Development Bank (Bloomberg)

ADB sees India GDP shrink 9% this fiscal

ADB said India’s growth outlook remains highly vulnerable to either a prolonged outbreak or a resurgence of cases, with the country now having one of the highest number of covid-19 cases globally

NEW DELHI : The Asian Development Bank (ADB) on Tuesday projected the Indian economy to contract 9% this fiscal, deeper than its June estimate of 4%, saying the fast-spreading coronavirus is hindering economic activity and consumer sentiment.

The multilateral bank, however, expects gross domestic product (GDP) to rebound next fiscal with an 8% growth.

ADB’s move follows rating agency S&P Global Ratings on Monday forecasting a 9% contraction in the Indian economy in FY21. Fitch Ratings and Moody’s Investors Service have also lowered their estimates for FY21 to a contraction of 14.8% and 11.5%, respectively, while investment bank Goldman Sachs has forecast GDP to shrink by 10.5% this fiscal.

“India imposed strict lockdown measures to contain the spread of the pandemic, and this has had a severe impact on economic activity," ADB chief economist Yasuyuki Sawada said in a statement.

“It is crucial that containment measures such as robust testing, tracking, and ensuring treatment capacities, are implemented consistently and effectively."

In its latest update to Asian Development Outlook, ADB said India’s growth outlook remains highly vulnerable to either a prolonged outbreak or a resurgence of coronavirus cases. “Other downside risks include increasing public and private debt levels that could affect technology and infrastructure investment, as well as rising non-performing loans ...that could further weaken the financial sector and its ability to support growth," it said.

The Manila-based bank said steps taken by the Indian government to address the pandemic, including a rural employment guarantee programme and other social protection measures, will aid rural incomes protecting the vulnerable people, but private consumption may continue to suffer.

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