The Indian Economy is expected to contract 9.6 per cent during the current financial year but can recover by 5.4 per cent next financial year if there is widespread vaccination against Coronavirus, the World Bank said in its Global Economic Prospects report on Tuesday, January 5.
"The forecast for 2021-22 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," the report read.
"In India, the pandemic hit the economy at a time when growth was already decelerating" and "the estimated contraction of the economy by 9.6 per cent during 2020-21 reflects "a sharp drop in household spending and private investment," it read.
The global economy, which contracted by 4.3 per cent in 2020 is expected to grow by 4 per cent next year if "an initial Covid-19 vaccine rollout becomes widespread throughout the year", the report mentioned.
The 5.4 per cent growth rate forecast for 2021-22 would be "offset by muted private investment growth given (that the) financial sector weaknesses", the WB report said pointing that "in the financial sector, non-performing loans were already high before the pandemic".
Focusing on the South Asian region, the World Bank said that the economy fell by 6.7 per cent in 2020 "reflecting the effects of the pandemic and nationwide lockdowns, particularly in Bangladesh and India".
"Activity rebounded in the second half of last year, led by industrial production, as initial stringent lockdowns were eased," it added.
The report also highlighted other risks including "financial and debt distress caused by an abrupt tightening of financing conditions or possible widespread corporate bankruptcies".
"Additional stress on domestic banks in the region could be triggered by the economic consequences of a more protracted recovery from the pandemic, which in turn could lead to a rise in bankruptcies and weaken the balance sheets of the banking and non-banking sectors," it added.
According to the Bank, China is expected to see its economy grow by 7.9 per cent.