The Asian Development Bank (ADB) projected India’s gross domestic product (GDP) will rebound strongly by 11 per cent in fiscal year (FY) 2021 ending on March 31, 2022 due to continued economic recovery boosted by increased public investment, vaccine rollout and a surge in domestic demand.
The forecast assumes that vaccines are deployed extensively across the country and the second wave of the coronavirus disease (COVID-19) pandemic is contained.
Economic activity will continue to normalise and recover, backed by government measures over the past year including a large stimulus in FY2020 and a steep increase in capital expenditure budget in FY2021. Increased government expenditure on health care, water, and sanitation will strengthen the country’s resilience against future pandemics.
Private investment is expected to pick up on improving sentiment and risk appetite, as well as accommodative credit conditions. Domestic demand is expected to remain the main driver of growth.
Inflation, after rising to 6.2 per cent in FY2020, is projected to moderate to 5.2 per cent in FY2021 as good harvests and supply chain recovery contain domestic food inflation. Inflation is expected to ease further to 4.8 per cent in FY2022 on moderating domestic demand as the economy returns to normal.
This will help the central bank maintain an accommodative stance by ensuring ample liquidity and keeping long-term interest rates from rising, said the ADO.