The Bank’s Global Economic Prospects Report said that the optimistic forecast for 2021-22 “assumes that a vaccine will be distributed on a large scale in the region starting the second half of 2021 and that there is no widespread resurgence in infections.”

About the economy’s contraction, the report said, “In India, the pandemic hit the economy at a time when growth was already decelerating” and “the estimated contraction of the economy by 9.6% during 2020-21 reflects “a sharp drop in household spending and private investment.”

The report said that India’s recovery would be constrained by the weak financial sector. The 5.4% growth rate forecast for in 2021-22 a “rebound from a low base” would be “offset by muted private investment growth given financial sector weaknesses”, the report said noting that “in the financial sector, non-performing loans were already high before the pandemic.” In the S Asia region, the Bank said the economy overall fell by 6.7% in 2020 “reflecting the effects of the pandemic and nationwide lockdowns, in Bangladesh and India.”