Two years after losing the coveted title, India may soon reclaim its spot as the world’s fastest-growing major economy.
The Indian economy will grow at 9.7% in 2021, which will be faster than all of the world’s major economies, according to London-based data and analytics firm GlobalData. This would be a sharp recovery from the technical recession that the country is currently facing.
GlobalData’s optimistic estimates are based on the massive inflows of foreign direct investments into the country over the recent months, the Narendra Modi government’s over Rs20 lakh crore ($266 billion) economic stimulus package, the recent drop in Covid-19 cases in India, and the demand revival during the festive season.
The firm also believes that the recently kicked-off vaccination drive will set sectors such as transportation, hospitality, and entertainment, which were severely dented due to the pandemic, on the recovery path.
China is likely to trail India in 2021 with an 8.6% gross domestic product (GDP) growth, GlobalData said.
Early signs of revival in the Indian economy are already visible, according to GlobalData.
“The easing of restrictions along with huge fiscal stimulus from the government has resulted in marginally better performance of Purchasing Managers’ Index—manufacturing and services since August 2020,” said Gargi Rao, economic research analyst at GlobalData.
The firm expects India’s industrial sector to grow in the first quarter of 2021 with capital and construction goods output set to increase as economic activity picks pace. It also pointed out that Indian “states have equally performed well in increasing domestic demand thereby increasing GST (goods and services tax) collections, which is a major catalyst for reviving economic growth numbers.” What could further aid the economic growth is the revival in global demand, which can lead to more exports from India.
This would all combine to fuel a V-shaped economic recovery for India in the current year, putting behind a difficult 2020.