India to slightly grow by 1 per cent over next 2 years: IMF Chief Economist

Prashasti Awasthi Mumbai | Updated on June 26, 2020

File Photo of Gita Gopinath   -  The Hindu

India’s economy will grow slightly by 1 per cent over 2020 and 2021, according to Gita Gopinath, chief economist of the International Monetary Fund (IMF) said on Thursday. IMF found that the pandemic has disrupted the economy more than the earlier predictions, NDTV reported.

"If you look at the growth projection for 2020 and add 2021, over two years, growth in India will be slightly over 1 per cent. That is not a very strong growth picture but it is similar to many other countries around the globe," Gopinath told NDTV in an interview.

This week, the IMF has also cut its projection for India as well as global growth. The agency estimates show that the Indian economy will contract this fiscal, but will bounce back smartly during the next fiscal.

"We have an incredibly deep downturn in India this year. And as you have reopened, as the health crisis abates, as the global economy recovers, India will also recover," Gopinath said.

When asked about her suggestion for the ruling dispensation, she said: "India needs to expand its testing capacity, some more budget spending would also help which is more direct cash and in-kind support for vulnerable people and also SMEs (small and medium enterprises and the third is to recognize that this is an opportunity to strengthen reforms."

China, the country where the virus emerged from, is the only country in the world to have witnessed positive growth in 2020. The growth rate of China is now forecast at 1 per cent compared to 1.2 per cent in the April forecast.

"China, among the larger economies, is the one with positive growth. It's hard to find another one. Their recovery is also strongest. This reflects that they have had a much quicker success in containing the virus, having briefer containment periods," she added.

The IMF views the current recession is the worst since the 1930s Great Depression, which saw global GDP shrink 10 per cent,

Gopinath noted that the $10 trillion in fiscal support and massive easing by central banks had so far prevented large-scale bankruptcies. More support will be needed, she added.

"The first half of the year had the deepest contraction. Now we are seeing a reopening, a spurt of activity. But the health crisis is not over and you are going to have future waves. There is tremendous uncertainty. So the recovery may start out being quick but will be prolonged in our opinion," Gopinath said.

Published on June 26, 2020

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