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IMF Projected India’s GDP to contract 10.3% from 4.5% in FY21 

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IMF projects India’s GDP to contract 10-3% in FY21On October 13, 2020, International Monetary Fund (IMF) in its latest World Economic Outlook (WEO-October 2020), titled “A Long and Difficult Ascent” projected India’s gross domestic product (GDP) to contract 10.3% (i.e.-10.3 %) in comparison to June forecast of 4.5% amid COVID19. On the other hand for FY21-22 Indian economy is expecting a rebound of 8.8% growth rate higher than the 6% forecast earlier.

  • On global front, the economy growth is downgraded to -4.4% as compared to 5.2% projected earlier. 
  • The global recovery in 2021 is projected to be at 5.2%. After 2021, global growth is expected to ease off at 3.5% in the medium term. 

Key Points:

-Indian economy projection is slowest among BRICS (Brazil, Russia, India, China, and South Africa) nations.

  • Notably, India’s GDP contracted 23.9% in Q1FY21.

Consumer prices in India are expected to grow at 4.9% this year and 3.7% in 2021 while the current account balance is projected to grow by 0.3% in FY21 and -0.9% (i.e., a contraction) in FY22.

-India’s retail inflation rose to an eight-month high of 7.34% in September, 2020.

-As per the forecast only Chinese economy would grow in FY21 at 1.9% faster than the earlier forecast of 1%.

-Close to 90 million people could fall below the $1.9 a day income threshold of extreme deprivation” in 2020.

-The world will not catch up fully to its pre-pandemic 2020-25 projected growth trajectory.

-Global growth will progressively decline to 2.1% in 2050 from 3.7% in 2021reflecting a diminished growth in emerging market economies.

Basis of Projections:

-The projections are based on the assumption that social distancing continues into 2021, vaccine coverage expands and therapies improve. 

-By the end of 2022 local transmission is expected to be low in the forecasting model. 

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Recent Related News:

i.India Ratings and Research (Ind-Ra), domestic rating agency projects India’s GDP growth to contract by 11.8%(-11.8%), from earlier -5.3%.

ii.On September 10, 2020 The latest report of the rating agency CRISIL projects India’s real GDP growth to contract by 9%(-9%) in FY21(2020-2021) as COVID-19 infections are yet to peak and the government is not providing adequate direct fiscal support.

About International Monetary Fund (IMF):
Managing Director (MD)– Kristalina Ivanova Georgieva Kinova
Economic Counsellor and Research Department Director– Gita Gopinath
Headquarter– Washington, DC, United States of America (USA)
Members– 189 countries