With 11.5% projected growth in FY22, India fastest growing economy: IMF
The economy is expected to bounce back strongly in the next fiscal year with 11.5% growth, the International Monetary Fund (IMF) said in its World Economic Outlook (WEO) update Tuesday. India is the only major economy forecast to grow in double digits next year and forecast to follow that up with the highest 6.8% rise in the FY23 fiscal.
The latest forecast for India’s FY22 gross domestic product (GDP) marks an upward revision from the 8.8% growth the IMF had estimated in its last assessment in October. “Notable revisions to the forecast include the one for India (2.7 percentage points for 2021 [FY22]), reflecting carryover from a stronger-than-expected recovery in 2020 after lockdowns were eased,” the IMF said.
The IMF also raised its India forecast for the current fiscal – it said the economy is likely to contract 8% compared with the 10.3% decline it had forecast in October.
The revisions came as July-September quarter GDP surprised on the upside, it said. India’s numbers are based on an April-March fiscal year while for the rest of the world the forecast is for the calendar year.
The results of a survey conducted by the Federation of Indian Chambers of Commerce and Industry (Ficci) earlier this month matched IMF’s assessment, with the median expectation of FY21 growth at -8%, according to the quarterly Economic Outlook Survey.
11.5% growth will largely be mechanical: IMF’s chief economist Gita Gopinath however cautions that India may not hit pre-Covid growth levels before 2025. The projected 11.5% growth she explains, will largely be mechanical, as the economy normalises from an estimated 8% contraction in the ongoing fiscal year, IMF chief economist Gita Gopinath said.
“The 11.5% number comes from the fact that you're coming off what we estimated as an 8% collapse the previous year. So, a lot of it is pretty mechanical,” she said. “Even if there's literally no further growth that happens after that recovery quarter-on-quarter, you have a very large number in terms of what the growth rate is going to be year-on-year for the year as a whole,” Gopinath said.
India’s GDP contracted by a massive 23.9% in the quarter ended June 2020 owing to the pandemic-induced lockdown, followed by a milder contraction of 7.5% in the quarter ended September 2020. According to the advance estimate released earlier this year, India’s statistics offices expects a 7.7% contraction for the full FY21.
“Over two years, we are looking at India being about 2-3% bigger when it's usually 12% bigger at this time. So, we still have a 9-10% gap that still has to be filled,” Gopinath said while highlighting the country’s output loss due to the pandemic.
At an 11.5% rise, the GDP in FY22 will only be 2.6% more than that of FY20.
