Due to unexpected damage to economic activity, India will grow at slightly over 1 per cent in the two years to 2021.
Even as the government rolls out landmark reforms to lift the social and economic conditions of the country amid coronavirus pandemic, India may witness a very slow economic growth in the next two years. Due to unexpected damage to economic activity, India will grow at slightly over 1 per cent in the two years to 2021, Gita Gopinath, chief economist of the International Monetary Fund (IMF), said in an interview with NDTV. As a piece of advice to Prime Minister Narendra Modi, Gita Gopinath said that India needs to expand its testing capacity; spend more to support vulnerable people and small and medium enterprises; and recognise that this is an opportunity to strengthen reforms.
However, she also mentioned that India’s pessimistic growth projection is similar to many other countries around the globe but as the country reopens, health crisis abates, and the global economy recovers, India will also recover. However, in the ‘June 2020 World Economic Report’, the IMF has predicted that the Indian economy would contract by 4.5 per cent in 2020. The report added that the global output may shrink 4.9 per cent this year, which is a sharper fall than the 3 per cent contraction predicted in April.
Addressing the current recession as the worst since the 1930s Great Depression, when the global GDP shrank 10 per cent, Gita Gopinath said that the $10 trillion in fiscal support and massive easing by central banks had so far prevented large-scale bankruptcies but more support will be needed. She also warned that the countries are reopening their markets but the health crisis is not over and there may be future waves.
The IMF has predicted that the pandemic will wipe out $12 trillion over two years, with worldwide business shutdowns destroying hundreds of millions of jobs, and major economies in Europe facing severe headwinds. Meanwhile, Gita Gopinath said that India has an incredibly deep downturn this year and among the larger economies, only China is expected to show positive growth as businesses have been started since April and new infections have been minimal.