Contraction in GDP of India in 2020-21: World Bank

Contraction in GDP of India in 2020-21: World Bank

Part of: GS Prelims and GS-III – Economy

In news

• Recently, the World Bank has released its South Asia Economic Focus report which estimated that India’s Gross Domestic Product (GDP) can contract by 9.6% for the year 2020-21.

Key takeaways 

• This estimate is lower than the earlier forecast of 3.2% contraction which was made in June, 2020 .
• It is due to the impact of the national lockdown against the outbreak of the Covid-19 pandemic. 
• Households and small urban service firms experienced income shock .
• The manufacturing and exporting industries may face reduced growth.
• The construction sector may also face slowdown.
• These disruptions to jobs will increase the poverty rate. 2020 rates may go back to levels in 2016.
• The economic slowdown could lead to rising loan non-repayment and risk aversion impacting the financial markets also. 
• However, India’s growth is estimated to rebound to 5.4% in 2021-22.