The World Bank has predicted that the Indian economy will shrink by 3.2% in in the current fiscal year. This will be the worst performance by the Indian economy since 1979. The world Bank also said that the world was facing its worst recession since the World War II and per capita incomes would fall plunging millions into poverty.
“Stringent measures to control the spread of the virus will heavily curtail activity, despite some support from fiscal and monetary stimulus. Spillovers from weaker global growth and balance sheet stress in the financial sector will also weigh on activity”, said World Bank.
The Bank’s Global Economic Prospects report cut the last fiscal year’s gross domestic product (GDP) growth for India to 4.2% and forecast it to fall by 3.2% in 2020-21 “when the impact of the pandemic will largely hit”.
The last time India had recorded a negative growth rate was in 1979 when it was -5.24%.
The Bank forecast the global economy to shrink by 5.2% this year resulting in a “largest fraction of economies experiencing declines in per capita output since 1870”. The projected 3.6% drop in per capita income this year “will tip millions of people into extreme poverty this year” ,the report warned.
The report expected global growth to rebound to 4.2% next year.
The Bank’s latest report presents a very negative turn around for India since January when it had projected the country to be the fastest growing major economy with a growth rate of 7.5% in 2019-20 and in the current fiscal year. The UN had projected last month a modest growth rate of 1.2% for India in the current fiscal year.