Indian economy poised to expand at a good clip in 2021

By Ashok Kumar

Intro: After battling the COVID-19 crisis over the past few months, India is showing signs of a rapid recovery in economic growth with analysts predicting healthy expansion over the coming months

The Indian economy is poised to expand at a good clip in 2021, as the country emerges after battling the COVID-19 crisis in 2020. Leading international experts and economists predict a faster growth rate this year.

The World Bank, in its Global Economic Prospects report notes that India’s growth will accelerate to 5.4 per cent in fiscal 2021-22.

The International Monetary Fund (IMF) is all praise for the decisive steps taken by the government, which will help accelerate the recovery in 2021. “What the government has done on the monetary policy and the fiscal policy side is commendable,” remarked Kristalina Georgieva, the IMF Managing Director recently. “It is actually slightly above the average for emerging markets. Emerging markets on average have provided six per cent of the GDP. In India, this is slightly above that. Good for India is that there is still space to do more.”

According to her, India has taken very decisive actions and steps to deal with the COVID-19 pandemic and the economic consequences. “India moved to more targeted restrictions and lockdowns. What we see is that the transition, combined with policy support seems to have worked well. Why? Because if you look at mobility indicators, we are almost where we were before COVID in India, meaning that economic activities have been revitalised quite significantly,” she added.

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India’s financial system faces both challenging times and new opportunities as the economy returns to full vitality, says Shaktikanta Das, Governor, Reserve Bank of India. “New vistas of financial intermediation leveraging on technology and new business models will emerge. With the exponential growth of digitisation and online commerce in India, the Reserve Bank has also directed its policy efforts to put in place a state-of-the-art national payments infrastructure, while ensuring a safe, secure, efficient, cost-effective and robust payments ecosystem.”

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According to him, the Reserve Bank is positioning itself to provide an enabling environment in which regulated entities are catalysed to exploit these new avenues, while maintaining and preserving financial stability.
Many international analysts believe India’s economy could grow at between 7.5 per cent and even more than 9 per cent in 2020, revealed a survey by a leading business daily. Barclays, for instance, was bullish, estimating 9.2 per cent year-on-year growth in GDP for calendar year 2021.

“After a sharp fall in GDP growth in 2020, we expect a reasonably sharp bounce back in 2021, as India will likely go back to pre-Covid GDP levels by H2 2012,” Rahul Bajoria, chief India economist, Barlcays, was quoted as saying.

Nomura, the Japanese financial services company said India would be the fastest-growing Asian economy in 2021, with GDP likely to expand by a whopping 9.9 per cent. But even more bullish is Goldman Sachs, which projected India’s GDP growth in 2021 to touch the double-digit mark at 10 per cent. This would be the highest for major economies in the world.

A more conservative figure of 7.6 per cent growth projection for India was the estimate of DBS Bank, making the country the fastest growing in the region. “Our baseline assumption is for consumption to improve as businesses come back online resulting in a lift to income and employment prospects, as well as a larger shift from unorganised to organised sector, with any acceleration in vaccine availability to be an additional tailwind,” the news report quoted Radhika Rao, senior vice president and economist, DBS Group Research.

With India managing to overcome the Covid crisis over the past few months, indicators are that 2021 would turn out to be a much more productive and vibrant fiscal for the country.

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