The World Bank in its South Asia Economic Focus report has said that India may record its worst growth performance since the 1991 liberalisation this fiscal year (FY21) as the coronavirus outbreak severely disrupts the economy. It said India's economy is expected to grow 1.5 per cent to 2.8 per cent in FY21. It estimated India will grow 4.8 per cent to 5 per cent in the FY20 that ended on March 31.
Further, it said that the COVID-19 outbreak came at a time when India's economy was already slowing due to persistent financial sector weaknesses. To contain it, the government imposed a lockdown, shutting factories and businesses, suspending flights, stopping trains and restricting mobility of goods and people. The resulting domestic supply and demand disruptions (on the back of weak external demand) are expected to result in a sharp growth deceleration in FY21. The services sector will be particularly impacted.
Besides, it said that a revival in domestic investment is likely to be delayed given enhanced risk aversion on a global scale, and renewed concerns about financial sector resilience. Growth is expected to rebound to 5% in FY22 as the impact of COVID-19 dissipates, and fiscal and monetary policy support pays off with a lag.
