Asian Development Outlook 2021: ADB

Context:

According to the report Asian Development Outlook (ADO) 2021, the second wave of Covid-19 can put India’s economic recovery at “risk”.

• ADO is a series of annual economic reports on the Developing Member Countries (DMCs) of the Asian Development Bank (ADB).
• The Asian Development Bank recently released its Asian Development Outlook, 2021. According to the report, India is to grow at 11%. The Asian Development Bank recently released its Annual outlook. The outlook says that ADB has provided a financial support of 1.5 billion USD to India to fight against COVID-19 

Key Findings of the report

For India

• Gross Domestic Product (GDP) will rebound strongly by 11% in Fiscal Year (FY) 2021-22 due to continued economic recovery boosted by increased public investment, vaccine rollout, and a surge in domestic demand.
• India’s economic growth to moderate to 7% in FY 2022-23.
• The economy is expected to have contracted by 8% in FY 2020-21 in line with the government’s second advance estimate.
• For Asia:
• According to ADB, the South Asia is expected to rebound at 9.5% in 2021. The South Asian region had contracted by 6% in 2020. The growth of the region will moderate to 6.6% in 2022.
• The economic growth of Asia is to rebound at 7.3% in 2021. The region faced a contraction of 0.2% in its growth in 2020. In 2022, its growth rate is to be 5.3%.
• The countries such as China, Hong Kong, Singapore and Taipei are expected to meet an increased growth rate of 7.7% in 2021 and 5.6% in 2022. The report classifies these countries as newly industrialised countries.
• The GDP of East Asia is expected to grow at 7.4% in 2021 and at 5.1% in 2022.

Report about China

• The GDP of China is to expand to 8.1% in 2021 and will reach a moderate value of 5.5% in 2022.
• Strong exports of China is to boost the economic activity of the country in 2021.

Reasons of recovery

The progress in production and delivery of COVID-19 vaccines helped Asia in reaching the current state. However, significant new outbreaks might undermine the growth of the region.

Challenges

The following challenges are faced by the Asian Economies:

• Increasing Geopolitical tensions
• Financial turmoil from tightening financial conditions
• Production bottlenecks

• Costs of Pandemic-induced School Closures:
• Countries are using distance learning, but this is only partially effective as many students lack access to computers and the internet.
• These disruptions will affect the skills students acquire and, eventually, their productivity and earnings as future workers.
• Learning losses range from 8% of a year of learning in the Pacific, where schools have mostly stayed open, to 55% in South Asia, where school closures have been longest.
• The present value of students’ future earning reductions is estimated at USD 1.25 trillion for developing Asia, equivalent to 5.4% of the region’s GDP in 2020.
• Analysis for India:
• Increased government expenditure on health care, water, and sanitation will strengthen the country’s resilience against future pandemics.
• Private investment is expected to pick up on improving sentiment and risk appetite, as well as accommodative credit conditions (i.e. making money less expensive to borrow and encouraging more spending).
• Domestic demand is expected to remain the main driver of growth.
  • A faster vaccine rollout will boost urban demand for services, while the rural demand will be boosted by robust agriculture growth and continued government support to farmers by expanding irrigation, improving value chains, and increasing farm loan limits.
• The government’s push to the manufacturing sector through the production-linked incentive scheme will expand domestic production and help integrate domestic manufacturing with global supply chains.

Asian Development Bank

• ADB is a regional development bank established in 1966.
• It has 68 members. India is a founding member.
  • 49 are from within Asia and the Pacific and 19 outside.
• It aims to promote social and economic development in Asia and the Pacific.
• As of 31st December 2019, ADB’s five largest shareholders are Japan and the United States (each with 15.6% of total shares), the People’s Republic of China (6.4%), India (6.3%), and Australia (5.8%).
• It is headquartered in Manila, Philippines.