India’s GDP to grow at 11% this fiscal, says ADB

Context:

The Indian economy is projected to grow at 11% in the current financial year amid the “strong” vaccine drive, said the Asian Development Bank (ADB) in its report – Asian Development Outlook (ADO) 2021.

Relevance:

GS-III: Indian Economy (Growth and Development of Indian Economy, Mobilization of Resources)

Dimensions of the Article:

1. Highlights of Asian Development Outlook (ADO) 2021
2. ADO 2021 on Impact of the Pandemic
3. About Asian Development Bank (ADB)

Highlights of Asian Development Outlook (ADO) 2021

• India’s Gross Domestic Product (GDP) will rebound strongly by 11% in Fiscal Year (FY) 2021-22 due to continued economic recovery boosted by increased public investment, vaccine rollout, and a surge in domestic demand.
• India’s economic growth will moderate to 7% in FY 2022-23.
• Indian economy is expected to have contracted by 8% in FY 2020-21 in line with the government’s second advance estimate.
• The ADB cited 2021’s ‘more targeted’ containment measures compared with 2020’s ‘large-scale’ national lockdown and said these would prove ‘less costly’ to the economy.
• A stimulus-fuelled surge in the U.S., India’s largest export market, will support the revival, but a severe second COVID-19 wave is threatening the recovery.
• ADB sees India’s average inflation rate slowing to 5.2% in 2021 from 6.2% in the last fiscal of 2020, and reverting to 4.8% (recorded in 2019-20), over the succeeding 12 months.

• Developing Asia’s economic growth is set to rebound to 7.3% in 2021-22. This follows a 0.2% contraction in 2020.
• Developing Asia comprises 46 members of ADB list on the basis of geographic group- including new industrialized economies, countries in Central Asia, East Asia, South Asia, Southeast Asia and the Pacific. [India is also a part of Developing Asia].

ADO 2021 on Impact of the Pandemic

• Pandemic remains the biggest risk for the region (Developing Asia) as potential delays in vaccine rollouts or significant new outbreaks could undermine growth.
• Increasing geopolitical tensions, production bottlenecks, financial turmoil from tightening financial conditions, and long-term scarring like learning losses due to school closures are among other risk factors.

School Closure factor

• Countries are using distance learning, but this is only partially effective as many students lack access to computers and the internet.
• These disruptions will affect the skills students acquire and, eventually, their productivity and earnings as future workers.
• Learning losses range from 8% of a year of learning in the Pacific, where schools have mostly stayed open, to 55% in South Asia, where school closures have been longest.
• The present value of students’ future earning reductions is estimated at USD 1.25 trillion for developing Asia, equivalent to 5.4% of the region’s GDP in 2020.

About Asian Development Bank (ADB)

• The Asian Development Bank (ADB) is a regional development bank established on 19 December 1966 to promote social and economic development in Asia.
• It is headquartered in the city of Mandaluyong, Metro Manila, Philippines.
• The ADB was modeled closely on the World Bank and an official United Nations Observer.
• Japan holds the largest proportion of shares in ADB followed by the USA, and it has a weighted voting system where votes are distributed in proportion with members’ capital subscriptions (just like the World Bank).
• The bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, formerly the Economic Commission for Asia and the Far East or ECAFE) and non-regional developed countries.
• ADB defines itself as a social development organization that is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.
• ADB aids in reducing poverty through investments in the form of loans, grants and information sharing (in infrastructure, health care services, financial and public administration systems), helping nations prepare for the impact of climate change or better manage their natural resources, as well as other areas.
• ADB is an official United Nations Observer.
• India was a founding member of the Asian Development Bank (ADB) in 1966 and is now the bank’s fourth largest shareholder and top borrower.

-Source: Down to Earth Magazine, The Hindu