NEW DELHI: India’s economy is expected to grow by 8.3% in the fiscal year 2021-22, aided by an increase in public investment and incentives to boost manufacturing, according to a World Bank report, which backed shifting to a services sector-led growth model for the region to strengthen the recovery.
“Real GDP in the current fiscal year is expected to grow by 8.3%, which is consistent with the last forecast from June 2021, and a 1.8 percentage point downward revision from the forecast in March 2021,” said the World Bank’s Fall 2021 economic update for South Asia. Growth is forecast to moderate to 7.5% next year. The RBI estimates GDP growth to be 9.5% in the current fiscal year while government officials say it could be closer to 10% given the sharp recovery that is underway. The acceleration in vaccination has also lent comfort to a more sustained recovery.
A separate survey by industry lobby group Ficci projected India’s FY22 GDP growth at 9.1% and said the economy is well prepared to tackle any headwinds from the tapering process.
The World Bank report said that the projected growth is supported by an increase in public investment to boost domestic demand and production-linked incentive schemes to boost manufacturing.
“Over the next two years, as the base effect fades, growth is expected to stabilise at around 7%, aided by structural reforms to ease supply-side constraints and infrastructure investment. In the medium term, uncertainty around asset-quality deterioration from the pandemic, higher-than-expected inflation, and slow recovery in the informal sector are the main downside risks,” according to the report.
“Throughout the pandemic, we have used a range for India’s growth this year from 7.5-12.5%, because of the uncertainties. The latest numbers indicate that we are at the lower end of that range,” Hans Timmer, World Bank’s chief economist for South Asia, told TOI over email.