India has a faster recovery than estimated; ADB updates forecast with 8 % GDP growth in FY21

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The Asian Development Bank (ADB) updated its predictions regarding Indian economy, anticipating 8 per cent contraction for 2020-21, in contrast to earlier forecast of 9 per cent degrowth, which indicates a faster recovery for India than estimated.

As the Indian economy is stabilizing now, the Asian Development Outlook (ADO) Supplement stated the second quarter contraction at 7.5 per cent was progressing better than estimated. With the impact of Covid-19 induced pandemic, the economy had contracted by as much as 23.9 per cent in June quarter of the present fiscal year.

It stated, “The GDP forecast for FY2020 is upgraded from 9.0 per cent contraction to 8.0 per cent, with GDP in H2 probably restored to its size a year earlier. The growth projection for FY2021 is kept at 8.0 per cent.”

Addressing the speedy economic recovery of India, the report stated the old forecast of 6.8 per cent contraction is revised to (-) 6.1 per cent synchronized with the enhanced prediction for India.

The report further revealed growth will blaze back in 2022-22 at 7.2 per cent in South Asia and 8 per cent in India.

Shaktikanta Das, Reserve Bank Governor, mentioned, earlier in December, the economy of India is recuperating faster than expected and the growth is most probably going to turn positive for the second half of the current financial year.

Regarding the rising inflation, ADO stated it will turn down in the forthcoming months, and that 4 per cent revised forecast for 2020-21 is maintained. The food inflation in India for the first seven months was around 9.1 per cent, thereby elevating the headline inflation to 6.9 per cent amid the same period. After which, ADO updated India’s inflation from 4.5 per cent to 5.8 per cent for the present financial year.

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