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World Bank Report Indicates Informal Sector Hit Hard, Indian Economy May Contract By 9.6% In 2020-21

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In its Global Economic Prospects report, the World Bank has said that India’s economy is estimated to contract by 9.6 per cent in the fiscal year 2020-21, reflecting a sharp drop in household spending and private investment, and the growth is expected to recover to 5.4 per cent in 2021.

The sector to bear brunt of this will be the informal sector, which accounts for four-fifths of employment, has been subject to severe income losses during the COVID-19 pandemic.

In India, the pandemic hit the economy at a time when growth was already decelerating. The output is estimated to contract by 9.6 per cent in Fiscal Year 2020/21, reflecting a sharp drop in household spending and private investment, it said. “In India, growth is expected to recover to 5.4 per cent in 2021, as the rebound from a low base is offset by muted private investment growth given financial sector weaknesses, the bank said.

The informal sector, which accounts for four-fifths of employment, has also been subject to severe income losses during the pandemic. Recent high-frequency data indicate that the services and manufacturing recovery are gaining momentum, the report said. “In the financial sector, non-performing loans were already high before the pandemic,” it said.

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