The International Monetary Fund (IMF) has further slashed India’s GDP projection for current fiscal (2020-21) by projecting contraction of 10.3 per cent. In June, it had projected contraction of 4.5 per cent.
As base has gone deeper, projection for the fiscal 2021-22 has seen sharp upturn with a growth projection of 8.8 per cent against June forecast of 6 per cent.
IMF’s latest forecast for the current fiscal is on a higher side in comparison with Asian Development Bank (contraction of 9 per cent), RBI (contraction of 9.5 per cent), the World Bank (9.6 per cent) and the Organisation for Economic Co-operation and Development (contraction of 10.2 per cent). However, it is lower than Goldman Sachs (contraction of 14.8 per cent).
Similarly for growth to bounce back during FY 2021-22, all have given different figures ranging from 5 per cent to nearly 9 per cent.
On emerging market
In its latest edition of World Economic Outlook, IMF on Tuesday has said for many emerging market and developing economies excluding China, prospects continue to remain precarious. This reflects a combination of factors: the continuing spread of the pandemic and overwhelmed healthcare systems; the greater importance of severely affected sectors, such as tourism; and the greater dependence on external finance, including remittances. All emerging market and developing economy regions are expected to contract this year, including notably emerging Asia, where large economies, such as India and Indonesia, continue to try to bring the pandemic under control.
“Revisions to the forecast are particularly large for India, where GDP contracted much more severely than expected in the second quarter. As a result, the economy is projected to contract by 10.3 per cent in 2020, before rebounding by 8.8 per cent in 2021,” the report titled, ‘A Long and Difficult Ascent’ said.
Global growth
For the world as a whole, according to the report, the growth is projected at (−) 4.4 per cent in 2020, a less severe contraction than forecast in the June 2020 World Economic Outlook Update which was 4.9 per cent.
The revision reflects better-than anticipated second quarter GDP out turns, mostly in advanced economies, where activity began to improve sooner than expected after lockdowns were scaled back in May and June, as well as indicators of a stronger recovery in the third quarter.
The report further said that global growth is projected at 5.2 per cent in 2021, a little lower than June 2020 WEO Update, reflecting the more moderate downturn projected for 2020 and consistent with expectations of persistent social distancing.
Following the contraction in 2020 and recovery in 2021, the level of global GDP in 2021 is expected to be a modest 0.6 percent above that of 2019. The growth projections imply wide negative output gaps and elevated unemployment rates this year and in 2021 across both advanced and emerging market economies.
“We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast. The revision is driven by second quarter GDP outurns in large advanced economies, which were not as negative as we had projected; China’s return to growth, which was stronger than expected; and signs of a more rapid recovery in the third quarter,” foreword to the report said.