India's growth for FY 2021/22, which began in April 2021, is forecast at 8.3%, supported by plans for higher spending on infrastructure, rural development, and health, and a stronger-than-expected recovery in services, the World Bank says in its June 2021 Global Economic Prospects. Better growth prospects since January, however, masks significant damage to economic activity from COVID19. The economy is expected to follow the same, yet less pronounced, collapse and recovery seen during the first wave. Growth in FY 2022/23 is expected to slow to 7.5%.
Despite rising COVID-19 cases, the economic recovery has been faster than expected, with activity in most sectors overtaking pre-pandemic levels. In India, an enormous second COVID-19 wave is undermining the rebound in services and manufacturing activity. High frequency data, including a renewed drop in foot traffic around work and retail spaces, suggests that activity is again collapsing.
COVID-19 cases have surged in South Asia and the situation in India has been particularly difficult, the World Bank stated. For the region, peaks in daily new confirmed cases and deaths are multiple times higher than last year. Progress in vaccination has been slow, and the largest economies, Bangladesh, India, and Pakistan, have vaccinated only a small fraction of their populations.
Growth is projected to rebound to a stronger-than-expected 6.8% in 2021, partly reflecting momentum from the end of last year. India accounts for most of the upgrade as strong services sector activity more than offsets the economic effects of the worsening pandemic. The outlook is underpinned by a rebound in private consumption. The recovery, however, has done little to narrow the gap with pre-pandemic trends. In 2022, GDP is expected to be 9% lower than projected prior to the pandemic.
The global economy is expected to expand 5.6% in 2021, the fastest post-recession pace in 80 years, largely on strong rebounds from a few major economies. However, many emerging market and developing economies continue to struggle with the COVID-19 pandemic and its aftermath, the World Bank says. Despite the recovery, global output will be about 2% below pre-pandemic projections by the end of this year. Per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies. Among low-income economies, where vaccination has lagged, the effects of the pandemic have reversed poverty reduction gains and aggravated insecurity and other long-standing challenges.
Among major economies, U.S. growth is projected to reach 6.8% this year, reflecting large-scale fiscal support and the easing of pandemic restrictions. Growth in other advanced economies is also firming, but to a lesser extent. Among emerging markets and developing economies, China is anticipated to rebound to 8.5% this year, reflecting the release of pent-up demand.
Emerging market and developing economies as a group are forecast to expand 6% this year, supported by higher demand and elevated commodity prices. However, the recovery in many countries is being held back by a resurgence of COVID-19 cases and lagging vaccination progress, as well as the withdrawal of policy support in some instances.
Excluding China, the rebound in this group of countries is anticipated to be a more modest 4.4%. The recovery among emerging market and developing economies is forecast to moderate to 4.7% in 2022. Even so, gains in this group of economies are not sufficient to recoup losses experienced during the 2020 recession, and output in 2022 is expected to be 4.1% below pre-pandemic projections.
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