IMF’s revised forecast may look rosier than it is

28 Jan 2021 Editorial Team

The International Monetary Fund (IMF) has projected that the Indian economy will witness a strong rebound and grow as much as 11.5% on-year in FY22, revising its earlier forecast of an 8.8% expansion.

On the one hand, India is set to emerge as the only major nation to record double-digit growth and reclaim the status of the world's fastest-growing economy. India's real gross domestic product (GDP) shrank as much as 8% in FY21 due to the Covid-19 pandemic, and in FY23, the economy will likely grow 6.8%. On the other, pre-Covid levels are not expected until 2025, IMF cautions.

Overview of World Economic Outlook Projections
	Year-Over-Year (% change) Projections
Nation	2021	2022
USA	5.1	2.5
Germany	3.5	3.1
UK	4.5	5.0
China	8.1	5.6
India	11.5	6.8
For India, data and forecasts have been presented on a fiscal year basis and GDP from 2011 onwards is based on GDP at market prices with the fiscal year as 2011/12.

Source: IMF

Last October, the IMF had projected an 8.8% GDP growth for India in FY22, the highest globally. For the current fiscal, however, the IMF had forecast a record 10.3% contraction. However, in an interview to NDTV channel, Gita Gopinath, Chief Economist at IMF, cautioned against reading too much into the growth over a period of negative growth, and urged the factoring-in of the fact that a second coronavirus wave has not hit India. She also said the figure does not reveal the distress in the informal sector. Cumulatively by the end of 2022, India is 9% below its pre-pandemic projected level, Gopinath said.

In its latest World Economic Outlook Update, the IMF predicted that China would grow 8.1% in 2021, followed by Spain (5.9%) and France (5.5%). China, which was the only major country to register a 2.3% growth rate in 2020, will expand 5.6% in 2022, the IMF said.

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