As India battles the Covid-19 pandemic and copes with the economic impact of the lockdown, International Monetary Fund chief economist Gita Gopinath said the country’s growth rate for 2020 and 2021 will be around 1%, which is similar to projections for many other countries.
“If you look at the growth projection for 2020 and add 2021, over two years, growth in India will be slightly over 1%. That is not a very strong growth picture but it is similar to many other countries around the globe,” Gopinath said in an interview with a TV channel NDTV.
She said India is facing a deep downturn and may recover after the global heath crisis abates. As for remedial measures, she said the Indian government should allocate more money to help small and medium-sized enterprises and provide more direct cash transfers to vulnerable sections of the population.
With regard to battling the pandemic, she said India needs to increase its testing capacity. The total number of confirmed cases in the country is now close to half a million and the daily average number of new cases is around 15,000. Its major industrial and commercial hubs such as Mumbai, Delhi and Chennai have been badly affected. As these cities are densely populated, their health infrastructure has been unable to cope with the burden.
The IMF had on Wednesday forecast that the Indian economy would contract by 4.5% in 2020. It also expects global output to shrink 4.9% this year, a sharper fall than the 3% contraction predicted in April. This is the IMF’s lowest projection for India since 1961.
The IMF has described the current global recession as the worst since the 1930s Great Depression, when the global GDP shrank 10%. Gopinath said the $10 trillion in fiscal support and massive easing by central banks had so far prevented large-scale bankruptcies but that more support will be needed. She also warned that there may be future waves of the pandemic because countries are reopening their markets too soon.
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.
Various other agencies have also forecast a contraction of the economy. The latest to do so is S&P Global Ratings, which expects the Indian economy to contract by 5% this fiscal.