India’s GDP to contract eight per cent, set to be worst performer in South Asia

NEW DELHI:  India’s GDP is expected to contract by 8 per cent in the current financial year and will be the worst performer in South Asia barring Maldives.

Bangladesh will post the best growth in the region growing at 5.2 per cent on the back of revived exports, said the Asian Development Bank said in its Asian Development Outlook.

With the Indian economy normalising, it expected the nation to post a contraction of 8 per cent against an earlier predicted 9 per cent. It also expects the Indian economy to rebound to a positive 8 per cent growth in 2021.  

“Having contracted by 23.9  per cent in Q1 of fiscal year 2020 (FY2020, ending 31 March 2021), the Indian economy began to normalise after containment measures started in ease in June,” ADB said.

Economists said that India’s GDP which had posted a sharp  contraction in the April-June 2020 quarter rebounded to a 7.5 per cent contraction the second quarter on the back of a better showing in agriculture where Gross Value Added (GVA) increased by 3.4 per cent.

“The acreage under Rabi cultivation is reported to be substantially higher, particularly in high-value storage in the reservoirs, one can expect another good year of agricultural growth,” said Dr M Govinda Rao, former member of the PM’s Economic Advisory Council  in a note for Brickworks Ratings.

Bangladesh is expected to grow by 5.2 per cent on the back of an economic recovery spurred by stronger than expected growth in exports and remittances.

Pakistan is expected to see contraction by 0.4 per cent according to an earlier Outlook by ADB in September and Sri Lanka, which depends on tourism, to 
contract by 5.5 per cent. 

Rao in his note also noted that revenue constraints will impact the government’s capital expenditure, particularly at the state level, which accounts for over two-thirds of total  government sector capex, adding “it would be too optimistic to expect the private sector to lift the capital formation numbers.”