Growth projection downgraded to 9.5%: IMF

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Growth projection downgraded to 9.5%: IMF

The International Monetary Fund (IMF) has downgraded India's Gross Domestic Product (GDP) growth projections for the current financial year to 9.5 per cent compared with its April estimates of 12.5 per cent owing to the disruptions caused due to the second wave of the COVID-19 pandemic.

For 2022-23 though, IMF has revised India's growth projections upwards to 8.5 per cent compared with its earlier estimate of 6.9 per cent.

In its World Economic Outlook for July released last week, the IMF pointed out that low vaccine coverage may cause a severe impact on India.

IMF Chief Economist Gita Gopinath’s assessment: IMF Chief Economist Gita Gopinath, in an interview with India Today TV, said India is doing well in terms of vaccination but rising unemployment and falling labour force participation numbers could be an issue.

 

Some highlights of her interview:

  • IMF did its projections earlier in April, I had just warned that there could be a downward risk to the forecast because the second wave was just starting and governments had started imposing localised lockdowns. That's the reason we have a downgrade of 3 percentage points this time.
  • We are living in incredibly uncertain times, and there is a lot of uncertainty. India had a deep recession last year, which tells you the kind of gap still needs to be filled. So for example, India is still 8-10 percentage points below where we would have projected it to be in the absence of a pandemic.
  • We had a 12.5 per cent GDP growth projection in April and we are down to 9.5. I think some people thought these numbers would come down to 2-3 percentage. So yes, there are adjustments that are being made and there is tremendous uncertainty. In terms of ballpark estimates, these are good guiding numbers.
  • The recovery we have right now comes after a very deep recession. A negative 7.3 per cent contraction in FY21 and then there's a return to some kind of normalcy. But, there is still a big gap as to where India should be in the absence of the pandemic. The unemployment rate has gone up and labour force participation has come down significantly. Those are the gaps that remain to be filled.
  • Vaccination is a very important factor behind the divide in the IMF growth projections where some countries are coming back strongly but some falling behind. We have advanced economies where an average of 40 per cent population is fully vaccinated. That number is 11 per cent in emerging markets and even lower in low-income countries.
  • It's a good sign for India that vaccination numbers have gone up and if that pace is maintained, that's the area where a lot more can be done.
  • The three things that India must do right now are additional support to low-income households, more spending on the healthcare sector and education, and communicating its medium-term fiscal strategy.

 

Second wave may have more lasting damage on economy: Moody’s

The second COVID-19 wave may have a more lasting damage on the Indian economy, said Moody’s Analytics on Monday. In a report titled 'APAC Economic Outlook: The Delta Roadblock', Moody’s predicted that exports will once again be the foundation for recovery. It estimated economic recovery to resume by year-end.

"While its second wave, which is now coming to an end, may have more lasting damage to the economy as the pandemic's one-two punch hit small enterprises very hard, exports will once again be the foundation for recovery," it said.

The Delta variant is adversely impacting Asia-Pacific (APAC) economies but the current hit will not be as severe as the recession in the second quarter of last year, it stated.

Even though exports make up relatively small shares of the economy, high commodity prices have boosted the value of exports, stated Moody’s. This helped in the economic recovery after the first wave of COVID-19 too.

While global economic recovery is at a solid pace, parts of Asia will only reflect this in the near term due to social distancing restrictions in place, especially in Southeast Asia as Delta variant continues to spread in the region, it said. Moody’s added that India is struggling to accelerate the pace of vaccination.

Moody's Analytics said global GDP this year will be in the range of 5-5.5 per cent, well above its 3 per cent potential growth rate as recovery continues from last year's pandemic recession.

"Global trade continued its rapid recovery well into this year's second quarter. Global industrial production also is still rising, although now at a slower pace than merchandise trade as tie-ups in global supply chains slow many manufacturing processes," it added.

 

India’s GDP growth lower than Bangladesh’s: Government

Minister of State (independent charge) for statistics and programme implementation Rao Inderjit Singh told Lok Sabha that though the gross domestic growth (GDP) growth rates of India’s economy are less than those of  Bangladesh  during 2017-2020, such comparison of economies of significantly different sizes may not be appropriate.

“India has been registering a fair GDP growth rate(at constant prices)…Though the growth rates are less than those of Bangladesh during 2017 to 2020, such comparison of economies of significantly different sizes may not be appropriate,” he said in a written reply.

India’s economy grew 8.3%, 6.8%, 6.5%, 4.0% and -7.3% in FY17, FY18, FY19, FY20 and FY21, respectively.

GDP growth rates of Bangladesh (at constant price) are 7.1%, 7.3%, 7.9%, 8.2% and 2.4% for the years 2016 to 2020 respectively as per the world bank database.

 

National unemployment rate rises to 7.14%

The rural unemployment rate has increased to 6.75 per cent in the week ended July 25, 2021, according to the latest data released by the Centre for Monitoring Indian Economy (CMIE). In the week ended July 18, the unemployment rate in rural areas stood at 5.1 per cent.

In contrast, there was only a marginal increase in the urban unemployment rate of the country during the same time period i.e week ended on July 25. The urban unemployment rate jumped to 8.01 per cent in the week ended July 25. In the week before this, the urban employment rate in the country was at 7.94 per cent.

Despite only a marginal increase over the past week, the unemployment rate in urban areas still remains greater than in rural areas even as COVID-19 restrictions eased by state governments over the past few weeks.

Presently, the national unemployment rate stands at 7.14 per cent. It is up from 5.98 per cent in the week-ago period. While the national unemployment rose over the past week, things are looking much better than the previous three months during which there was rampant joblessness due to the second wave of the COVID-19 pandemic.

The monthly national unemployment rate in June was 9.17 per cent, which was still a significant decrease from 11.9 per cent in May. The national unemployment rate had shot up to a 12-month high in May due to the second wave of the COVID-19 pandemic which resulted in states imposing lockdown and restrictions across the country.

In June, the unemployment rate was 10.07 per cent in urban India and 8.75 per cent in rural India. Governments easing COVID-19 restrictions and businesses reopening had helped stabilise the unemployment rate in the country during June.

 

320 foreign companies registered in India between 2018-2021

A total of 320 foreign companies were registered in India in the last three years, Minister of state for corporate affairs Rao Inderjit Singh, in a written reply to a question in Rajya Sabha. 118 foreign companies were registered in 2018-19; 124 in 2019-20; and 78 in 2020-21.

Maharashtra registered the maximum foreign companies in 2018-19 at 42, followed by 26 in Delhi and 19 in Haryana. In the year 2019-20, Maharashtra registered the highest number of 40 companies, followed by Delhi (28) and Haryana (22). The year 2020-21 saw Maharashtra registering 23 foreign companies despite the first Covid-19 wave, followed by Delhi (15) and Tamil Nadu (9).

He said the states and UTs earned Rs 13.5 crore as fees on account of registration and forms filed by such foreign companies in 2018-19. In 2019-20, they earned Rs 13.2 crore and Rs 7.2 crore in 2020-2021.

A "Foreign Company" is defined under section 2 (42) of the Companies Act, 2013, (the Act) as any company or body corporate incorporated outside India which (a) has a place of business in India by itself or through an agent, physically or through electronic mode and (b) conducts any business activity in India in any other manner.


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