IMF Slashes India’s FY22 GDP Outlook to 9.5%
The International Monetary Fund (IMF) has sharply scaled down India’s economic growth projection by 300 basis points to 9.5 per cent for the current financial year from 12.5 per cent estimated earlier in April. IMF said the downward revision is owing to “lack of access to vaccines” and possibility of renewed waves of coronavirus.
“Growth prospects in India have been downgraded following the severe second Covid wave during March–May and expected slow recovery in confidence from that setback,” IMF said in the latest edition of its flagship World Economic Outlook (WEO) report.
IMF’s projections for India in the current fiscal are similar to the Reserve Bank of India’s (RBI’s), but moderately optimistic than those of World Bank. The World Bank projected India’s economy to grow at 8.3 per cent in 2021 and 7.5 per cent in 2022, even as its recovery is being hampered by an unprecedented second wave of the COVID-19.
However, IMF sees India’s gross domestic product (GDP) growing by 8.5 per cent, 160 basis points higher than its earlier projection, in the next financial year (FY23). Should that happen, India would become the most rapidly expanding large economy in the world with the closest competitor, China, is projected to grow by 5.7 per cent.
IMF’s Chief Economist Gita Gopinath said, “Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of Covid-19 cases in some countries, notably India, have led to downgrades.”
She said, “Close to 40 per cent of the population in advanced economies have been fully vaccinated, compared with 11 per cent in emerging market economies, and a tiny fraction in low-income developing countries.The growth prospects for emerging market and developing economies have been marked down for 2021, especially for emerging Asia. By contrast, the forecast for advanced economies has been revised upwards. These revisions reflect pandemic developments and changes in policy support.”
The forecast for the group is revised down 0.4 percentage point in 2021 compared with the April WEO, largely because of growth markdowns for emerging Asian economies. Like in India, Similar dynamics are at work in the ASEAN-5 group (Indonesia, Malaysia, Philippines, Thailand, Vietnam), where recent infection waves are causing a drag on activity.
IMF has kept the the global economy projection of 6.0 percent unchanged in 2021. It has also projected global economy to grow by 4.9 per cent in 2022, up from the previous forecast of 4.4 per cent. The world output contracted 3.3 per cent in 2020.