India is projected to retain the tag of fastest growing economy in the world with the International Monetary Fund (IMF) forecasting 8.5 per cent growth for the year 2022.
In its latest World Economic Outlook report, released on Tuesday, the IMF said that Indian economy is expected to grow by 9.5 per cent in 2021 and 8.5 per cent in the next year.
The announcement comes as a positive sign for the economy which is recovering from the slump created by the Covid-19 pandemic.
In FY21, the economy had witnessed a negative growth of 7.3 per cent, first time in almost 40 years.
India also witnessed its first technical recession last year with two consecutive quarters of negative growth in wake of the nationwide lockdowns to curb the spread of Covid-19 pandemic.
However, with cases declining, economic activities in the country are gradually regaining pace with the economy witnessing record 20.1 per cent rise in gross domestic product (GDP) in Q1 of FY22. The growth can be largely attributed to a low base effect and resumption of business activities.
IMF’s country-wise growth forecast
| Country | 2021 | 2022 |
|---|---|---|
| India | 9.5%9.5% | 8.5%8.5% |
| China | 8.0%8.0% | 5.6%5.6% |
| US | 6.0%6.0% | 5.2%5.2% |
| Germany | 3.1%3.1% | 4.6%4.6% |
| France | 6.3%6.3% | 3.9%3.9% |
| Italy | 5.8%5.8% | 4.2%4.2% |
| Spain | 5.7%5.7% | 6.4%6.4% |
| UK | 6.8%6.8% | 5.0%5.0% |
| Canada | 5.7%5.7% | 4.9%4.9% |
| Japan | 2.4%2.4% | 3.2%3.2% |
‘India doing well in vaccinations’
The report praised India for its vaccination drive against the Covid virus and therefore helping in economy recovery, IMF chief economist Gita Gopinath said in a virtual conference after the release of the report.
“We don’t have a change to our growth forecast for this year for India. I mean India came out of a very, very tough second wave and that led to a big downgrade in July but we have no change (in its growth rate projections) as of now,” Gopinath said.
Gopinath said there are many challenges that the Indian economy already faces with regard to the financial market, with regard to the fact that the virus is not gone yet.
“The Indians are doing well in terms of vaccination rates and that’s certainly helpful,” Gopinath said in response to a question.
Global growth projection lowered
The global growth projection for 2021 has been revised down marginally to 5.9 per cent and is unchanged for 2022 at 4.9 per cent.
However, this modest headline revision masks large downgrades for some countries.
The United States is projected to grow at 6 per cent this year and 5.2 per cent the next year.
China, on the other hand, is projected to grow at 8 per cent in 2021 and 5.6 per cent in 2022.
“The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics. The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions,” Gopinath said.
“Partially offsetting these changes, projections for some commodity exporters have been upgraded on the back of rising commodity prices. Pandemic-related disruptions to contact-intensive sectors have caused the labour market recovery to significantly lag the output recovery in most countries,” the Indian-American economist added.
Observing that the dangerous divergence in economic prospects across countries remains a major concern, she said aggregate output for the advanced economy group is expected to regain its pre-pandemic trend path in 2022 and exceed it by 0.9 per cent in 2024.
US growth slowdown
The IMF slashed its 2021 US growth forecast by a full percentage point, to 6 per cent, from 7 per cent in July – a level that was seen as the strongest pace since 1984.
US growth could shrink further, the IMF said, because its forecasts assume a deeply divided US Congress will approve President Joe Biden’s proposed infrastructure and social spending worth $4 trillion over a decade.
Lawmakers now are trying to achieve consensus on a smaller package, and the IMF said a significant reduction would reduce growth prospects for the United States and its trading partners.
(With inputs from agencies) /TOI #360pms