India’s economy projected to contract by 4.5% in FY21: IMF

NEW DELHI: Covid-19 battered India’s economy is projected to contract by 4.5 per cent this fiscal, said the International Monetary Fund. In the World Economic Outlook (WEO) forecast report, the IMF said that India’s economy is expected to contract on the back of a longer lockdown and a slower recovery than anticipated in April.

Accordingly, the country’s economy will contract in FY21 from an expansion of 4.2 per cent in FY20. In terms of calendar year 2020, the economy is expected to contract by (-)4 .9 per cent.

Nevertheless, for fiscal 2021-22, INF projected a growth of 6 per cent for the country. “India’s economy is projected to contract by 4.5 per cent following a longer period of lockdown and slower recovery than anticipated in April,” IMF said in the WEO forecast report.

In another section of the report, IMF noted that India has unveiled a liquidity support programme worth 4.5 per cent of GDP through loans and guarantees for businesses and farmers and equity injections into financial institutions and the electricity sector. Besides, the report projected a (-)4.9 per cent contraction in global growth during 2020, which is 1.9 percentage points below the April 2020 WEO forecast.

“The Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast,” the report said.

“In 2021, global growth is projected at 5.4 per cent. Overall, this would leave 2021 GDP some 6 1/2 percentage points lower than in the pre-Covid-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperilling the significant progress made in reducing extreme poverty in the world since the 1990s.”