The two massive waves of COVID-19 have significantly disrupted India’s economic trajectory, causing economic growth to plunge to historic lows in 2020 at -7.3% YOY, and rewrite India’s new GDP forecast. As the second wave eases, restrictions loosen, and the pace of vaccinations gradually ramp up we expect the economy to recover to pre-pandemic levels by the end of 2021.
What does this mean for your business operations? India remains the third-largest economy in the Asia Pacific region, with its GDP accounting for over 10% of the regional economy. After a steep contraction caused by the pandemic, India’s GDP will quickly grow this year, supported by low base effects from 2020 and the expectation of increasing vaccinations, eventually resulting in improved demand for in-person consumption activity. Growth will be supported by government incentives for domestic manufacturing for key sectors including consumer electronics, pharmaceuticals, medical devices, and food processing.
This does not mean that all the risks have been eliminated. You should consider using scenario analysis in your strategic planning because India’s economic trajectory is still uncertain. A massive third wave of outbreaks, major glitches in the vaccine rollout, and poor execution of the government’s intended spending could throw off current growth forecasts. FrontierView’s analysts use our proprietary dataset to calculate India’s expected GDP trajectory. Our current base-case scenario for India in 2021 puts GDP growth at 6.1%.
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