The Bank expects public consumption to contribute positively, but pent-up private demand to fade by end of 2021.
India’s economy is expected to grow at 10.1% for the year starting April 1, 2021, as the vaccine roll-out drives activity in contact-intensive sectors, as per the World Bank’s South Asia Economic Focus South Asia Vaccinates report. However, given the significant uncertainty around epidemiological and policy factors, real GDP growth could range from 7.5% to 12.5% , stabilising at 6-7% in the medium term, it said.
“It is not normal to talk about these wide ranges in the forecast,” Hans Timmer, Chief Economist for the World Bank’s South Asia region, said on a briefing call with reporters. “The reason is that we are really in unprecedented circumstances,” he said. GDP had been difficult to forecast due to the size of the hit and also its nature. The normal rules of extrapolation were not usable at the moment, Mr. Timmer said.
The report highlights some of these difficulties in measuring GDP. For instance, the pandemic likely caused informal sector incomes – already hard to measure – to fall sharply. Also, measuring the value of service sector transactions during the pandemic is difficult. The increased reliance on digital services will also cause estimation challenges in the future.
The fiscal year ending March 31 2021, is expected to register the worst economic damage due to the pandemic, the report says (the economy contracted 8.5% in FY20-21 as per the World Bank’s estimate).
News Source:- The hindu