United Nations: India has emerged from a “very tough second wave” of Covid-19, Gita Gopinath, the International Monetary Fund’s (IMF) Chief Economist, said at the release of the flagship report that showed India continuing to be the world’s fastest growing major economy clocking a growth rate of 9.5 per cent this fiscal year and 8.5 per cent in the next.
The IMF’s World Economic Outlook (WEO) report kept the gross domestic product (GDP) growth projections it had made in July while India was in the grip of Covid-19’s second wave and had cut by 3 per cent its forecast of 12.5 per cent made in April before the pandemic’s resurgence.
Briefing reporters at the release of the report in Washington, Gopinath said: “India came out of a very, very tough second wave and that led to a big downgrade in July but we have no change.”
“India is doing well in terms of vaccination rates and that’s certainly helpful,” she said.
India does, however, face many challenges, she noted.
“As of now, you know there are many challenges that the Indian economy always does face with regard to the financial market, with regard to the fact that the virus has not gone yet,” Gopinath said.
Asked if the large fiscal deficit in India was a major concern, Malhar Nabar, the Deputy Division Chief in IMF Research Department, said that while a medium-term strategy was needed to bring it down, it was still possible to meet the pressures from any future pandemic upsurge.
“We think that there’s still room to provide more support if needed, if the pandemic takes a turn for the worse, and to provide it in a targeted manner to the worst affected households and firms,” he said.
“But going forward over the medium term, it would be important to put in place, credible, medium term strategy to bring down the debt to GDP ratio and create space to meet the future development needs and infrastructure needs,” he added.
The WEO said that India’s Covid-battered economy had shrunk by 7.3 per cent in the last fiscal year.
Its long-term forecast for India’s GDP growth is 6.1 per cent in 2026.
The IMF forecast is more than a per cent higher than the World Bank’s estimate of 8.3 per cent for this fiscal year, which puts it behind China’s 8.5 per cent growth this year.
The Bank’s Regional Economic Update released last week said India’s GDP growth is expected to moderate to 7.5 per cent next year and 6.5 per cent in 2023-24.