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The International Monetary Fund (IMF), on Tuesday, lowered the contraction estimate by 2.3 per cent for the current fiscal (FY21) while upping the projection for next fiscal (FY22).
The latest World Economic Outlook of IMF estimates India’s GDP to contract by 8 per cent during the current fiscal. This estimate was 10.3 per cent in the October outlook. For the next fiscal, starting from April 1, GDP growth projection is at 11.5 per cent, 2.7 per cent higher than the projection made in October.
The latest revision for the current fiscal is higher than the government’s first advance estimate of 7.7 per cent and also the RBI’s estimate of 7.5 per cent. Though the government and RBI have not given a forecast for the next fiscal, various agencies have projected double-digit growth, mainly on account of the base effect.
“Notable revisions to the forecast include the one for India (2.7 percentage points for 2021 i.e., FY21-22), reflecting carryover from a stronger-than-expected recovery in 2020 after the lockdowns were eased,” said IMF in its latest outlook update.
Global forecast
Talking about the global economy, the update revised the forecast for 2021 by 0.3 percentage point to 5.5 per cent. For 2022, the projection remained at 4.2 per cent. “Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year, renewed waves and new variants of the virus pose concerns for the outlook,” the update said.
Further, it has been mentioned that the projected growth recovery this year (2021) follows a severe collapse in 2020 that has had adverse impact on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors. The global growth contraction for 2020 is estimated at -3.5 per cent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020).
Talking about better growth prospects during current calendar, it says upward revision reflects additional policy support in a few large economies, and expectations of a vaccine-powered strengthening of activity later in the year. The upgrade is particularly large for the advanced economy group, reflecting additional fiscal support — mostly in the United States and Japan — together with expectations of earlier widespread vaccine availability, compared to emerging markets and developing economy group.
On the price front, the outlook said that reflecting the projected global recovery, oil prices are expected to rise in 2021, just over 20 per cent from the low base for 2020, but will still remain well below their average for 2019. Non-oil commodity prices are also expected to increase with those of metals, in particular, projected to accelerate strongly in 2021, the outlook said.
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