World Bank envisages 3.2 per cent contraction in Indian economy

On Monday, World Bank released its global economic outlook stating that the COVID-19 outbreak has put the global economy into severe contraction. It estimates the world economy to contract by almost about 5.2 per cent this year, demonstrating the deepest recession since World War II, with the largest portion of economies undergoing declines in per capita output since 1870.

According to the predictions made by World Bank, the economic activity among advanced economies is likely to drop nearly 7 per cent this year whereas emerging markets and developing economies are predicted to experience a decline of about 2.5 per cent in their economic activity.

Specifically in case of India, World Bank predicts the Indian economy to shrink by 3.2 per cent in the ongoing fiscal year (2020-21). It further stated that despite support from fiscal and monetary stimuli, the stringent measures taken to contain the spread of the virus will be responsible to a large extent for curtailed activity. Additionally, balance sheet stress in the financial sector and spillovers from weakened global growth will weigh down economic activity.

Moreover, in fiscal year 2017-18, the Indian economy witnessed seven per cent growth, which in the subsequent year dipped to 6.1 per cent and in 2019-20, was estimated to shrink to 4.2 per cent.