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World Bank likely to project steeper contraction in Indian economy than before

20 Aug 2020 Evaluate

The World Bank in its report 'India Development Update' for July 2020, has said it is likely to project a steeper contraction in India’s economy than the 3.2 per cent it had forecast for the current financial year, given the rising number of Covid-19 cases and the resultant regional lockdowns. It cautioned India against using its tariff policy to attract firms seeking a shift away from China.

It also warned that credit risks could play out as firms and households find it more difficult to service interest and repayment obligations. It called for full privatisation of some public sector banks and private capital injection in others. It said despite India making progress in poverty reduction in recent years, the deadly virus has made half of the population vulnerable to be pushed to poverty.

The World Bank said ‘in our revised projections, which will be available in October 2020, we will likely project a steeper contraction in the economy.’ By then, it added, new information would have been incorporated, especially given the rising infections resulting in several state and district lockdowns. Further, the available high frequency indicators show that the economy is yet to revert to baseline.

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