The IMF on Tuesday projected an impressive 12.5 per cent growth rate for India in 2021, stronger than that of China, the only major economy to have a positive growth rate last year during the COVID-19 pandemic. The Washington-based global financial institution, in its annual World Economic Outlook ahead of the annual Spring meeting with the World Bank, said the Indian economy is expected to grow by 6.9 per cent in 2022.
Notably in 2020, India’s economy contracted by a record eight per cent, the International Monetary Fund (IMF) said as it projected an impressive 12.5 per cent growth rate for the country in 2021. Gita Gopinath, chief economist of the International Monetary Fund, on Wednesday expressed her approval of India’s current fiscal stance, however, she said there is a case to be made to do some more on the revenue expenditure front. She further stressed on the need for the government to focus on education and financial sectors.
In an exclusive interview with CNBC-TV18, she said, “If you look at the fiscal stance for India including the February Budget, then overall the stance is appropriate, it is not pulling back support, it is not withdrawing support, so that is a good thing. What I would say though is that the focus is on capital expenditures as opposed to revenue expenditures. So I would say there is a case to be made to do some more on the revenue expenditure front – maybe about 0.5 percent of GDP and that could be spent for instance on extending income transfers and also on expenditure on education. The second issue is in terms of the financial sector. This pandemic has lasted long, there are firms that will exit with weaker balance sheets and non-performing loans will become a bigger problem. So it is important to plan for more capital infusions into the banking sector.”
She said, “Our forecasts were locked in on March 5, so we certainly haven’t taken second wave into account. However when we did our projections, we assumed that the virus was still around and there were still chances of localised lockdowns. That is why when you look at the numbers in terms of the sequential growth, it is fairly conservative in 2021. However if the lockdowns become much more of nationwide lockdowns, then that is a serious downside risk to our forecast.”
The IMF has projected the growth rate of 6.4 per cent for the USA this year on the back of vax-driven growth. For China, the IMF has increased its GDP projection to 8.4 per cent for this year, a 10-year high, but Gopinath cautioned that economic growth in the world’s second largest economy was unbalanced and private consumption has not recovered as fast as expected following the coronavirus crisis.
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