India’s GDP will contract by 10.3% in 2020-21 fiscal year, says IMF

With the coronavirus pandemic still to be contained and the central government’s stimulus measures having limited impact on economic activities and consumer demand, the outlook for the Indian economy for the current financial year has only worsened.

In its latest global outlook, the International Monetary Fund (IMF) predicts that India’s GDP will contract by 10.3 per cent in the 2020-21 fiscal year. This is a downward revision of its previous estimate of 5.8 per cent.

As India’s growth falls, amongst the most in the world, India is on track to fall below Bangladesh in terms of the per capita GDP. India will grow smartly next year, as per IMF.

In her foreword to the World Economic Outlook, IMF Chief Economist Gita Gopinath noted on Tuesday that preventing further setbacks to the global economy would require that policy support is not prematurely withdrawn.

The outlook for the next financial year for India (2021-22), however, has improved. The IMF now estimates an 8.8 per cent growth in the country’s GDP in FY22, higher than the previous estimate of 2.8 per cent.

Noting that all emerging market and developing economy regions are expected to contract this year, IMF’s World Economic Outlook said: “Revisions to the forecast are particularly large for India, where GDP contracted much more severely than expected in the second quarter. As a result, the economy is projected to contract by 10.3 per cent in 2020, before rebounding by 8.8 per cent in 2021.”

Global economy is now projected to contract 4.4 per cent in 2020, as per IMF’s latest estimate.

“The path ahead will require skilful domestic policies that manage trade-offs between lifting near-term activity and addressing medium-term challenges,” she said.

The social media is buzzing after the International Monetary Fund predicted that Bangladesh would overtake India in per capita GDP for 2020.

As per the World Economic Outlook report, India’s per capita GDP is set to plunge by 10.5 per cent to $1,877 this fiscal year ending March 31, 2021. This will make India the third poorest country in South Asia with only Pakistan and Nepal behind.

Bangladesh, Bhutan, Sri Lanka and Maldives now have more per capita GDP than India.

Bangladesh’s per capita GDP in dollar terms is expected to grow 4 per cent in 2020 to $1,888, overtaking India.

Congress leader Rahul Gandhi attacked the BJP government on this count. “Solid achievement of 6 years of BJP’s hate-filled cultural nationalism: Bangladesh set to overtake India”.

Stock market expert and Director Enam Holdings, Manish Chokhani tweeted: “Today’s special. Both our neighbours marching ahead. We wish them well and hope our achievements meet our own aspirations”.

Chokhani added a clipping of Bangladesh overtaking India and China’s booming economy and stock markets. The tweet was tagged to business and stock market leaders Samir Arora, Nilesh Shah, Anand Mahindra, Harsh Goenka and Harsh Mariwala.

Till five years back, India’s per capita GDP was 40 per cent higher than Bangladesh. In the last five years, Bangladesh has grown three times the rate of India, at 9.1 per cent compared to 3.2 per cent for India, a much larger economy.

Meanwhile, high food, primary articles and manufactured goods’ prices accelerated India’s September wholesale inflation.

Consequently, the annual rate of inflation based on wholesale prices rose to 1.32 per cent in September from 0.16 per cent in August from (-) 0.25 per cent in July.

On a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry has risen by only 0.33 per cent during the corresponding period of the previous year.

“The annual rate of inflation, based on monthly WPI, stood at 1.32 per cent (provisional) for the month of September, 2020 (over September, 2019) as compared to 0.33 per cent during the corresponding month of the previous year,” the Ministry said in its review of ‘Index Numbers of Wholesale Price in India’ for September.

On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI’s total weightage, increased 5.10 per cent from 1.60 per cent in August 2020.

Furthermore, the prices of food items remained at elevated levels with a rise of 6.92 per cent from 4.07 per cent reported for August.

On Monday, another set of data showed that India’s sequential retail price inflation spiked in September to 7.34 per cent from 6.69 per cent in August.

Indo-Asian News Service