World Bank’s latest report has predicted that India’s real GDP growth for the next financial year could range from 7.5 to 12.5 per cent, a significant jump from this year’s numbers.

“As economic activity normalises, domestically and in key export markets, the current account is expected to return to mild deficits (around 1 per cent in FY22 and FY23) and capital inflows are projected by continued accommodative monetary policy and abundant international liquidity conditions,” the report said.

World Bank, in its latest South Asia Economic Focus report released ahead of the annual Spring meeting, said that the economy was already slowing when the Covid-19 pandemic unfolded. It said that after reaching 8.3 per cent in financial year 2016-17, growth decelerated to 4.0 per cent in the last financial year.

The slowdown was caused by a decline in private consumption growth and shocks to the financial sector (the collapse of a large non-bank finance institution), which compounded pre-existing weaknesses in investment, it said.

Noting that the Covid-19 shock will lead to a long-lasting inflexion in India’s fiscal trajectory, the report said that the general government deficit is expected to remain above 10 per cent of GDP until FY22.

As a result, public debt is projected to peak at almost 90 per cent of GDP in FY21 before declining gradually thereafter. As growth resumes and the labour market prospects improve, poverty reduction is expected to return to its pre-pandemic trajectory.

The World Bank said that the poverty rate (at the USD 1.90 line) is projected to return to pre-pandemic levels in FY22, falling within 6 and 9 per cent, and fall further to between 4 and 7 per cent by FY24.