IMF upgrades India’s growth forecast to impressive 12.5 per cent in 2021
India's projected growth rate in 2021 is stronger than that of China which was the only major economy globally to have a positive growth rate amid the pandemic in 2020.
The International Monetary Fund on April 6, 2021, projected a 12.5% growth rate for India in the year 2021. It is stronger than that of China which was the only major economy globally to have a positive growth rate amid the pandemic in 2020.
The global financial institution in its annual world economic outlook stated that the Indian economy is expected to grow by 6.9% in 2022. The statement was made ahead of the IMF’s annual spring meeting with the World Bank.
India’s economy in 2020 had contracted by a record 8%, said IMF as it projected a 12.5% growth rate for the country in 2021. On the other hand, China, which was the only economy with a positive growth rate of 2.3% in 2020, has been projected to grow by 8.6% in 2021 and 5.6% in 2022.
Stronger recovery for the global economy in 2021 and 2022:
Gita Gopinath, the Chief Economist at the International Monetary Fund stated that a stronger recovery for the global economy has been projected in 2021 and 2022 compared to IMF’s previous forecast. IMF now projects growth to be 6% in the year 2021 and 4.4% in 2022.
We forecast growth for emerging market and developing economies at 6.7% in 2021, moderating to 5% in 2022. Read the latest World Economic Outlook to learn more: https://t.co/hcZ4l9uUWv #WEO. pic.twitter.com/JEb7dp5wuH— IMF (@IMFNews) April 7, 2021
The global economy in 2020 had contracted by 3.3 percent. As per the report, after an estimated contraction of 3.3 per cent last year, the global economy is expected to grow by 6 per cent in 2021 and moderate to 4.4% in 2022.
Smaller contraction for 2020 than projected:
The contraction for the year 2020 is 1.1% points smaller than projected in October 2020 World Economic Outlook.
It clearly reflects the higher-than-expected growth outturns in the second half of the year as most regions after the lockdown was eased and economies started adapting the new ways of working.
|The report also noted that the projections for 2021 and 2022 are 0.8% point and 0.2% point stronger than in October 2020 World Economic Outlook. It reflects the additional fiscal support in larger economies and the highly-anticipated vaccine-powered recovery in the second half of 2021.|
In what way the policymakers can support the economies amid health crises?
According to Gita Gopinath, the policymakers will require to continue supporting their economies.
It will require better-targeted measures to leave space for prolonged support if needed. With multi-speed recoveries, a tailored approach is required, with the policies formulated to the stage of the pandemic, the structural characteristics of individual countries, and the strength of the economic recovery.
The emphasis of the countries must be on escaping health crisis by prioritizing vaccinations, health care spending, and health care infrastructure. Fiscal support must be well-targeted to the affected households and firms.
Steps to be taken once the health crisis is over:
Once the global health crisis is over, the policy efforts by the world economies must focus more on building inclusive, resilient, and greener economies in order to boost the economic recovery and for raising the potential output.
Gopinath states that the priorities must include green infrastructure investment in order to help mitigating climate change, strengthen social assistance to arrest rising inequality and invest in digital infrastructure to boost production capacity.
The global economy has shrunk by 4.3% in 2020. It was over two and half times more than during the 2009 global financial crisis.