Indian economy to grow at 9.5 percent, global economy at 5.9 percent in 2021: IMF

Indian economy is expected to grow at 9.5 percent in 2021 and at 8.5 percent in 2022, as per the latest projections by the International Monetary Fund (IMF) in its World Economic Outlook October 2021 released on October 12, 2021.

The IMF stated that India's economy had contracted by 7.3 per cent in 2020 due to the impact of the COVID-19 pandemic. Among other countries, the IMF has projected China to grow at 5.6 per cent in 2022, the US to grow at 5.2 percent and the United Kingdom to grow at 5 percent.

For major European nations, IMF has projected Germany to grow at 4.6 percent, France to grow at 3.9 percent and Italy to grow at 4.2 percent in 2022.

We forecast growth for emerging market and developing economies at 6.4% in 2021, a marginal revision from our July forecast. Growth will moderate to 5.1% in 2022. Read the latest World Economic Outlook to learn more: https://t.co/hYpP2Ag5d6 #WEO. pic.twitter.com/DkolCT2wNy

— IMF (@IMFNews) October 13, 2021

Global Economy 

The International Monetary Fund has lowered its global growth projection for 2021 slightly to 5.9 percent, while it has kept its projection for 2022 unchanged at 4.9 percent. The projection for 2021 is 0.1 percentage point lower than in the July forecast.

The modest downward revision in the growth projection for this year reflects large downgrades for some countries, in advanced economies largely due to supply disruptions and for low-income developing countries, largely due to worsening of pandemic dynamics.

Rise in Inflation

As per the International Monetary Fund, inflation has increased markedly in some emerging market economies and in the United States due to an increase in demand with relaxations in restrictions and slow supply.

However, the price pressures are expected to subside in most countries in 2022, according to IMF. Inflation prospects remain highly uncertain though as increases in inflation are occurring even as employment is below pre-pandemic levels in many economies, forcing difficult choices on policymakers.

Global economy risks

Director of the Research at IMF, Gita Gopinath said, "the global recovery continues, but momentum has weakened, hobbled by the pandemic." 

She added that the risks to global economic prospects have increased and policy trade-offs have become more complex amid the COVID-19 pandemic. She stated that the divergences in growth prospects across countries persist and remain a major concern and that these divergences are a consequence of the ‘great vaccine divide’ and large disparities in policy support.

She highlighted that the major risk factor includes new variants of the virus that could further slow down the economic recovery. She noted, "We're seeing major supply disruptions around the world that are also feeding inflationary pressures, which are quite high and financial risk-taking also is increasing, which poses an additional risk to the outlook."

Risk Mitigation 

According to Gopinath, the foremost priority is to vaccinate the world. She continued by saying that greater multilateral action is needed to vaccinate at least 40 percent of the population in every country by the end of 2021 and 70 percent by the middle of 2022. She also highlighted the need to take much greater action to address climate change.

Strong Policy Support

The IMF noted that strong policy effort is needed at the multilateral level on vaccine deployment, climate change and international liquidity to strengthen global economic prospects.

The body noted that national policies will require much more tailoring to country-specific conditions and better targeting, as policy space constraints become more binding the longer the pandemic lasts.