IMF raises India’s growth projection to 12.5% for FY22

The International Monetary Fund (IMF) has upped its growth projection for India by one percentage point for the current fiscal that started on April 1. Even for the next fiscal, it has revised the projection upwards.

According to the latest edition of the World Economic Outlook (WEO) released on Tuesday, India is projected to grow at 12.5 per cent during the current fiscal (FY 2021-22). This is the highest not just among emerging economies, but also in the group combining advanced economies. In fact, India will be the only country that is estimated to register double-digit growth. For FY 2020-21, the IMF estimates the GDP to contract by 8 per cent.

Growth forecast

In January, IMF’s projection for the current fiscal was 11.5 per cent. For the next fiscal (FY 2022-23), the forecast was 6.8 per cent, which in the latest report has been revised a tad to 6.9 per cent. India’s better performance has an impact on the ‘Emerging and Developing Asia’ regional group.

“For the Emerging and Developing Asia regional group, projections for 2021 have been revised up by 0.6 percentage point, reflecting a stronger recovery than initially expected after lockdowns were eased in some large countries (for example, India),” the WEO said. However, still high Covid-19 caseloads in some large countries in 2020:Q1 (such as Indonesia and Malaysia) put a lid on the growth prospects, it mentioned.

IMF’s optimism has come at a time when India has achieved the infamous landmark of one lakh plus Covid-19 cases in a single day amidst the second wave of pandemic. However, the agency’s optimism is matched by a report prepared by the Economic Affairs Department of the Finance Ministry and released on April 5. The report said: “As the vaccination drive continuously upscales in India, and guided by the learnings of India’s successful management of the pandemic during its first wave, India is now well armed to combat any downside risk posed by the recent surge in Covid-19 cases. With the end of a challenging FY 2020-21, the crest of a brighter and self-reliant FY 2021-22 awaits India!”

Global outlook

Talking about the global outlook, the report projected global economy to grow at 6 per cent in 2021 as against a contraction of 3.3 per cent in 2020. Further, it expected the global economy to moderate to 4.4 per cent in 2022.

“The contraction for 2020 is 1.1 percentage points smaller than projected in the October 2020 World Economic Outlook (WEO), reflecting the higher-than-expected growth outturns in the second half of the year for most regions after lockdowns were eased and as economies adapted to new ways of working,” the report said.

The projections for 2021 and 2022 are 0.8 percentage point and 0.2 percentage point stronger than in the October 2020 WEO, reflecting additional fiscal support in a few large economies and the anticipated vaccine-powered recovery in the second half of the year.

“Global growth is expected to moderate to 3.3 per cent over the medium term — reflecting projected damage to supply potential and forces that predate the pandemic, including ageing-related slower labour force growth in advanced economies and some emerging market economies,” the report mentioned.