IMF retains India’s growth forecast for FY22 at 9.5%

Our Bureau New Delhi | Updated on October 12, 2021

Also maintains growth outlook for 2022-23 at 8.5 per cent; slashes global economy forecast by 5.9 per cent for 2021

The International Monetary Fund (IMF) on Tuesday retained India’s GDP at 9.5 per cent for the current fiscal i.e. 2021-22 while cutting forecasts for the global economy by 5.9 per cent for the year 2021.

The Indian economy recorded growth of 7.3 per cent during FY 2020-21.

The IMF’s latest assessment is part of the annual World Economic Outlook, released on the eve of the annual IMF and World Bank meeting taking place at Washington. Finance Minister Nirmala Sitharaman is leading the Indian delegation in the meeting.

Titled, ‘October 2021 World Economic Outlook: Recovery During a Pandemic Health Concerns, Supply Disruptions, and Price Pressures’, the report also maintained growth outlook for next fiscal (2022-23) at 8.5 per cent. Earlier, in July, the Fund had cut the growth forecast for the current fiscal by 300 basis points but raised the projection for next fiscal by 160 basis points.

IMF’s projection for the current fiscal is similar to RBI’s and S&P growth projection of 9.5 per cent. However, it is higher than Fitch’s estimate of 8.7 per cent and World Bank’s estimate of 8.3 per cent. Various other agencies have projected growth rate of 8.2- 9.5 per cent except Asian Development Bank which expects a double digit growth rate (10 per cent) for the current fiscal. OECD projection is also at the higher side with 9.7 per cent.

Global economy

The IMF report, which is piloted by Indian born Economic Counselor and Director of the Research Department of IMF, Gita Gopinath, said the global recovery continues but the momentum has weakened, hobbled by the pandemic. “Fuelled by the highly transmissible Delta variant, the recorded global Covid-19 death toll has risen close to 5 million and health risks abound, holding back a full return to normalcy,” it said.

Pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries. Overall, risks to economic prospects have increased, and policy trade-offs have become more complex. “Compared to our July forecast, the global growth projection for 2021 has been revised down marginally to 5.9 percent and is unchanged for 2022 at 4.9 percent. This modest headline revision, however, masks large downgrades for some countries,” the report said.

Further it mentioned that the outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics. The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions. Partially offsetting these changes, projections for some commodity exporters have been upgraded on the back of rising commodity prices. Pandemic-related disruptions to contact-intensive sectors have caused the labour market recovery to significantly lag the output recovery in most countries.

The report said: “If Covid-19 were to have a prolonged impact into the medium term, it could reduce global GDP by a cumulative $5.3 trillion over the next five years relative to our current projection. It does not have to be this way.”

Further it called for the global community to step up efforts to ensure equitable vaccine access for every country, overcome vaccine hesitancy where there is adequate supply, and secure better economic prospects for all.

Published on October 12, 2021

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