The International Monetary Fund (IMF) projected on Tuesday that India’s gross domestic product (GDP) would plunge in fiscal year 21 by 10.3%, revised down from its June forecast of a 4.5 drop. %, which reflects a severe contraction of what was anticipated in economic activities in the first year. quarter as a result of the national shutdown as well as the rapidly spreading pandemic.
In its biannual World Economic Outlook, the IMF said all emerging market and developing economy regions are expected to contract this year, notably including emerging Asia, where large economies such as India and Indonesia continue to try to control the growth. pandemic. “The forecast revisions are particularly important for India, where GDP contracted much more severely than expected in the second quarter (June). As a result, the economy is projected to contract 10.3% in 2020, before recovering 8.8% in 2021, “he added.
The IMF said GDP for the June quarter was weaker than projected in India, where domestic demand slumped after a sharp compression in consumption and a collapse in investment. India’s GDP contracted 23.9% in the June quarter, making it the worst performer among the G20 economies. The Reserve Bank of India (RBI) admitted on Friday for the first time that the economy will contract 9.5% in fiscal year 21, with a slight expansion in economic activity in the March quarter.
However, the multilateral lending organization said that global growth could see a less severe contraction of -4.4% in 2020 than was forecast in June (-5.2%), reflecting better-than-expected GDP growth. expected in the June quarter in advanced economies, where activity began to improve. earlier than expected, indicating a stronger recovery in the September quarter.
“The climb out of this calamity is likely to be long, uneven, and highly uncertain. It is essential that support for fiscal and monetary policy is not withdrawn prematurely, in the best possible way, “said IMF chief economist Gita Gopinath.
Without naming India, Gopinath said emerging market and developing economies are handling this crisis with fewer resources, as many are constrained by high debt and higher borrowing costs. “These economies will have to prioritize critical spending for health and transfers to the poor and guarantee maximum efficiency. Where debt is unsustainable, it should be restructured sooner rather than later to free up finances to deal with this crisis, “he added.
The IMF warned that the pandemic will reverse the progress made since the 1990s in reducing global poverty and increase inequality. “People who depend on daily wage labor and are outside the formal safety net faced sudden loss of income when mobility restrictions were imposed. Among them, migrant workers living far from home relied even less on traditional support networks. About 90 million people could fall below the income threshold of $ 1.90 per day of extreme deprivation this year, “he added.
Global growth is expected to decline progressively from 3.7% in 2021 to 2.1% in 2050, reflecting declining growth in emerging market economies as they approach the income levels of advanced economies .
Gopinath said cumulative production loss relative to projected trajectory before the pandemic is projected to grow from 11 trillion in 2020-21 to 28 trillion in 2020-25. “This represents a severe setback for the improvement in the average standard of living in all groups of countries,” he added.
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