The International Monetary Fund, in its most recent projections, has revised the FY2022 growth forecast for India by 2.7 percent from October estimates, reflecting a stronger-than-expected recovery in FY2021 after lockdowns were eased. It now estimates the Indian economy to expand at the rate of 11.5 percent in FY2022 and in FY2023, the growth is likely to taper down thereon to 6.8 percent.
Overall, the global economy is likely to grow 5.5 percent in 2021 and 4.2 percent in 2022. The upward revision in 2021 numbers is mainly due to the expectation of rising momentum in the second quarter as vaccines and therapies become more readily available, allowing contact-intensive activity to strengthen. Growth is expected to strengthen in the second half of 2021.
Rate of recovery to vary
The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020). Even in the Indian perspective, FY2021 GDP estimates 2.3 percent lesser contraction compared to previous projections.
IMF further added that the strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spill overs, and structural characteristics entering the crisis. It maintains that surging infections in late 2020 (including from new variants of the
virus), renewed lockdowns, logistical problems with vaccine distribution and uncertainty about take-up continue to be areas of concern.
Oil prices set to scale higher
According to the IMF, much remains to be done on the health and economic policy fronts to limit persistent damage from the severe contraction of 2020 and ensure a sustained recovery. The report additionally highlighted that, “Reflecting the projected global recovery, oil prices are expected to rise in 2021 just over 20 percent from the low base for 2020, but will still remain well below their average for 2019. Non-oil commodity prices are also expected to increase with those of metals, in particular, projected to accelerate strongly in 2021.”
The way to a resilient economy
The IMF called for policymakers to prioritise efforts to address its likely enduring legacies and synchronised public investment push by the largest economies with fiscal space to do so can enhance effectiveness of individual actions and boost cross-border spillovers through trade linkages. It emphasised on green infrastructure and digitalisation to raise productivity and closer multilateral cooperation to resolve economic issues.