In its latest World Economic Outlook report, released on Tuesday, the IMF said the Indian economy is expected to grow 9.5 percent in 2021 and 8.5 percent next year.
The announcement is a positive sign for the economy that is recovering from the depression created by the Covid-19 pandemic.
In fiscal year 21, the economy had experienced negative growth of 7.3 percent, for the first time in nearly 40 years.
India also witnessed its first technical recession last year with two consecutive quarters of negative growth in the wake of nationwide lockdowns to slow the spread of the Covid-19 pandemic.
However, with the decline in cases, economic activities in the country are gradually picking up pace and the economy posted a record 20.1 percent increase in gross domestic product (GDP) in the first quarter of fiscal year 22 The growth can be attributed largely to a low base effect and the resumption of business activities.
‘India is good on vaccines’
The report praised India for its vaccination campaign against the Covid virus and thus for helping the economy recover, IMF chief economist Gita Gopinath said at a virtual conference after the report was released. .
“We don’t have a change in our growth forecast for this year for India. I mean, India came out of a very, very difficult second wave and that led to a big downgrade in July, but we have no change (in its growth rate projections ) from now on, ”Gopinath said.
Gopinath said that there are many challenges that the Indian economy is already facing regarding the financial market, regarding the fact that the virus is not gone yet.
“Indians are doing well in terms of vaccination rates and that’s certainly helpful,” Gopinath said in response to a question.
Decrease in global growth projection
The global growth projection for 2021 has been marginally revised down to 5.9 percent and remains unchanged for 2022 at 4.9 percent.
However, this modest headline review masks big downgrades for some countries.
The United States is projected to grow 6 percent this year and 5.2 percent next.
China, on the other hand, is forecast to grow 8% in 2021 and 5.6% in 2022.
“The outlook for the group of low-income developing countries has darkened considerably due to worsening dynamics of the pandemic. The downgrade also reflects more difficult short-term prospects for the group of advanced economies, in part due to disruptions in the supply, “Gopinath said.
“To partially offset these changes, projections for some commodity exporters have been updated due to rising commodity prices. Pandemic-related disruptions in contact-intensive sectors have caused the labor market recovery to stagnate. delay significantly with the recovery of production in most countries, “said the Indian. -Added the American economist.
Noting that the dangerous divergence in the economic outlook between countries remains a major concern, he said that the aggregate output of the group of advanced economies is expected to regain its pre-pandemic trend path in 2022 and exceed it by 0.9% in 2024.
US growth slowdown
The IMF cut its forecast for US growth for 2021 by a full percentage point, to 6%, from 7% in July, a level that was considered the strongest pace since 1984.
US growth could contract further, the IMF said, because its forecasts assume that a deeply divided US Congress will approve President Joe Biden’s proposed infrastructure and $ 4 trillion worth of social spending over a decade.
Lawmakers are now trying to reach consensus on a smaller package, and the IMF said a significant reduction would reduce growth prospects for the United States and its trading partners.
(With inputs from agencies)