After the 2020 huge GDP contraction, economic growth is projected to bounce back in 2021, driven by pentup demand for consumer and investment goods, before declining in 2022. The dramatic infections upsurge since February has weakened the nascent recovery and may compound financial woes of corporates and banks. As public anxiety over the virus spreads and lockdowns multiply, high-frequency indicators suggest that a marked slowdown may have taken place in the April-June quarter, although the overall annual impact is likely to be muted. Wholesale and retail inflation rates remain elevated, but within the target range of the central bank.
Hitting particularly hard the informal sector, where much of the Indian population works, the pandemic reinforced the need for creation of jobs in the formal sector and reforms of health care, protection of vulnerable individuals, households and groups.
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2021 Structural Reform Priorities
Income has increased fast in recent years and millions of Indians have been lifted out of poverty. India has also become a key player in the global economy. The implementation of an ambitious set of reforms has supported economic activity and helped put a break on inflation and on both fiscal and current account deficits.