NEW DELHI: The Organisation of Economic Cooperation and Development (OECD) on Tuesday revised upwards India’s GDP contraction for 2020-21 to -9.9% from the previous -10.2%, saying the economy is recovering, albeit with some hesitancy, after emerging from the world’s tightest lockdown and recording the deepest GDP contraction among G20 economies in the second quarter.
The Paris-based policy forum, which unveiled its Economic Outlook on Tuesday, said India’s GDP is likely to shrink by 9.9% in the current fiscal as consumption remains sluggish and investment stays largely unresponsive to easier monetary conditions. “Despite a projected rebound of 8% and 5% in FY2021-22 and FY2022-23 respectively due to base effects and returning confidence, GDP loss will be substantial,” OECD said.
Several economists, investment banks and multilateral agencies have revised upwards their estimates for India’s GDP contraction after the economy displayed signs of a swift recovery after the lockdown was lifted and economic activity gathered pace.
But the OECD report sounded caution. “Although confidence will return, scars to the economy are still lingering and it may take almost two years for GDP to get back to pre-pandemic levels,” the OECD said. It said that the assumption that all Covid-related restrictions will be lifted by 2022 hinges on access to rolling out of a safe and effective vaccine.