A strong rebound in private consumption and investment growth is likely to push India’s FY22 growth to 10.1 per cent, according to the World Bank, much higher than the 5.4 per cent it had projected in January.
However, considering the uncertainty in 2021-22, the World Bank also gave a range of economic growth for India — 7.5 to 12.5 per cent, according to its South Asia Economic Focus Spring update report.
The government consumption is expected to rise by 16.7 per cent 2021, largely reflecting strong fiscal stimulus in India. Other demand categories are also revised up, said the World Bank, as the vaccination drive is expected to improve business activity and spur incomes in contact-intensive sectors.
As the largest country in the region, India’s increase was enough to make South Asia the only major region in the developing world to see an upturn in foreign direct investment (FDI) in 2020.
The World Bank said India was the only country in the region to see an increase in FDI during 2020, though from a low base. FDI was equivalent to 1.5 per cent of GDP.
India is attracting record numbers of deals in IT consulting and digital sectors including e-commerce platforms, data processing services and digital payments. However, much of the increase thus came from mergers and acquisitions and not greenfield investment.
In India, said the World Bank, a combination of FDI, capital inflows and dampened import demand led to net international reserves almost doubling to 17.3 months of imports of goods and services from an already comfortable 10.7 in 2019.
Overall, the South Asia region is expected to grow by 7.2 per cent in 2021 and 4.4 per cent in 2022, driven by the firm bounce-back from a very low base in mid-2020 (from a revised GDP decline of 5.4 per cent in 2020), said the World Bank.