World Bank on Tuesday in its Global Economic Prospects report said that it estimates India's economy to contract by 9.6 percent in the fiscal year 2020-21.
Hit by the pandemic, a sharp drop in household spending and private investment will also be reflected. Due to the pandemic, severe income losses is noted in the informal sector, which accounts for four-fifths of employment. However, the services and manufacturing recovery sectors are gaining momentum and the growth is expected to recover to 5.4 percent in 2021, it said.
Meanwhile 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 percent in 2021, as the rebound from a low base is offset by muted private investment growth given financial sector weaknesses,” the bank said.
In the rest of South Asia, the economic impact of COVID-19 was also significant. Economies of countries like Maldives, Nepal, and Sri Lanka, that depend heavily on tourism and travel have been affected.
"Regional economic activity is estimated to have contracted by 6.7 per cent in 2020, led by a deep recession in India, where the economy was already weakened before the pandemic by stress in non-bank financial corporations," the World Bank said adding that South Asia is projected to grow by 3.3 per cent in 2021.
The forecast assumes that a vaccine will be distributed on a large scale in the region starting the second half of 2021 and that there is no widespread resurgence in infections, it added.