New Delhi: India's economic growth is likely to slow down to 4 per cent this fiscal on the back of the current global health emergency, Asian Development Bank said in its outlook for financial year 2020-21 on Friday.
Growth in India will remain subdued after the country suffered a sharp slowdown last year, from 6.1 per cent in fiscal 2019 to 5 per cent, as a credit crunch that originated in the non-banking financial sector severely hampered bank lending , the Manila-based lender said.
"We face extraordinarily challenging times. The outbreak of coronavirus (COVID-19) is disrupting people's lives and interrupting business and other economic activities around the world," said Masatsugu Asakawa, President of Asian Development Bank.
Noting that COVID-19 has not yet spread extensively in India, ADB said measures to contain the virus and a weaker global environment will whip up headwinds, offsetting support from corporate and personal income tax cuts as well as financial sector reforms which are meant to revive credit flows.
In its Asian Development Outlook (ADO) 2020 the lender said: Gross domestic product (GDP) growth in India is forecast to slow further to 4 per cent in FY21 before strengthening to 6.2 per cent in the next fiscal.
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South Asia will face a milder slowdown, it stated.
Growth in South Asia will decelerate to 4.1 per cent in FY2021 and then recover to 6 per cent in FY2022, largely tracking the trend in the dominant Indian economy, according to ADB.
After a disappointing fiscal, growth in the Asia and Pacific region is expected to slow sharply to 2.2 per cent in FY2021 under the effects of the current health emergency and then rebound to 6.2 per cent in FY2022, ADB said.
Developing Asia will weaken tremendously due to the pandemic, considering the region's deep integration with the global economy through tourism, trade, and remittances, it said, adding that plummeting commodity prices are also placing a severe burden on some countries.
ADB warns global cost of virus could top $4 trillion
The coronavirus pandemic could cost the global economy $4.1 trillion as it ravages United States, Europe and other major economies, the Asian Development Bank warned.
The estimated impact is equivalent to nearly five percent of worldwide output based on a range of scenarios, but the lender said losses from "the worst pandemic in a century" could be higher.
"The estimated impact could be an underestimate, as additional channels such as...possible social and financial crises, and long-term effects on health care and education are excluded from the analysis," the ADB said.
The Manila-based bank said a shorter containment period could pare the losses to $2 trillion.
The crisis has sent equity markets spinning as traders fret over the long-term impact on the world economy, though governments and central banks have stepped in to ease the pain, pledging more than $5 trillion in stimulus and easing monetary policy.
With billions of people in lockdown and economies at a standstill, the ADB said Asia is forecast to grow 2.2 percent this year, its slowest pace since a 1.7 percent expansion during the Asian financial crisis in 1998.
"No one can say how widely the COVID-19 pandemic may spread, and containment may take longer than currently projected," ADB chief economist Yasuyuki Sawada said.
"The possibility of severe financial turmoil and financial crises cannot be discounted," he added.
(PTI and AFP Report)
