AT A GLANCE
Since the 2000s, India has made remarkable progress in reducing absolute poverty. Between 2011 and 2015, more than 90 million people were lifted out of extreme poverty.
However, the COVID-19 pandemic has reversed the course of poverty reduction, at least temporarily. The economic slowdown triggered by the outbreak is believed to have had a significant impact on poor and vulnerable households.
After March 25, 2020, when a national lockdown was implemented, economic activity slowed sharply. As a result, output fell by a whopping 25 percent (year on year) between April and June, the first quarter of the FY21 fiscal year.
The informal sector, where the vast majority of India’s labor force is employed, has been particularly affected. As in most countries, the pandemic has exacerbated vulnerabilities for traditionally excluded groups, such as youth, women, and migrants.
Real GDP is estimated to have contracted by 8.5 percent in FY21 overall, but it has become positive again in the second half of the year. As growth resumes, poverty reduction is expected to return to its pre-pandemic trajectory.
The response of the Government to the COVID-19 outbreak has been swift and comprehensive. A national lockdown to contain the health emergency was complemented by a comprehensive policy package to mitigate the impact on the poorest households (through various social protection measures) as well as on small and medium enterprises (through enhanced liquidity and financial support).
To build back better, it will be essential for India to stay focused on reducing inequality, even as it implements growth-oriented reforms to get the economy back on track. The World Bank is partnering with the government in this effort by helping strengthen policies, institutions, and investments to create a better future for the country and the people through green, resilient an inclusive development.
After growing at very high rates for years, India’s economy had already begun to slow down before the onset of the COVID-19 pandemic. Between FY17 and FY20, growth decelerated from 8.3 percent to 4.0 percent, with weaknesses in the financial sector compounded by a decline in the growth of private consumption.
The implementation of a national lockdown on March 24, 2020 (i.e. on the eve of the new FY21 fiscal year), brought economic activity to a halt, affecting both production and consumption. As a result, growth was negative in the first half of the fiscal year (April to September 2020) and only modestly positive in the second half. Over the entire FY21, India’s economy is estimated to have contracted by 8.5 percent.
In response to the COVID-19 shock, the Government and the Reserve Bank of India took several monetary and fiscal policy measures to support vulnerable firms and households, expand service delivery (with increased spending on health and social protection) and cushion the impact of the crisis on the economy. Thanks in part to these proactive measures, the economy is expected to rebound - with a strong base effect materializing in FY22 - and growth is expected to stabilize at around 6-6.5 percent thereafter.
Last Updated: Mar 31, 2021