IMF Retains India's Growth At 9.5% For 2021, Cuts Global Rate To 5.9%

The IMF forecasts 9.5 percent growth for India in 2021, which is comparable to the Reserve Bank of India's (RBI) projection for fiscal 2021-22 made at its most recent monetary policy committee (MPC) meeting.

IMF Retains India's Growth At 9.5% For 2021, Cuts Global Rate To 5.9%
IMF Retains India's Growth At 9.5% For 2021, Cuts Global Rate To 5.9%

Following the devastating second wave of COVID-19 pandemic in India, the International Monetary Fund (IMF) lowered India's growth prediction to 9.5 percent for 2021, down from 12.5 percent in July.

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According to the IMF's newest World Economic Outlook (WEO) report released on Tuesday, the Indian economy, which shrunk by a record 7.3 percent as a result of the pandemic, is anticipated to grow at 8.5 percent in 2022. The 9.5 percent growth forecast for 2021 is close to the Reserve Bank of India's (RBI) projection for fiscal 2021-22 made at its most recent monetary policy committee (MPC) meeting on October 8. 

The World Bank forecasted 8.3% growth for India in the current fiscal year 2021-22, down from a previous prediction of 10.1 percent.

India's growth will be aided by an increase in public investment and incentives to boost manufacturing, said the World Bank in its report.

India's economy increased by 20.1 percent in the first quarter of this fiscal year, owing to a low base effect, as the economy had fallen by a record 24.4 percent the year before, when COVID-19 first hit the country. 

In its latest WEO update, released ahead of its annual conference and the World Bank, the IMF lowered its global economic prediction to 5.9% from 6%. 

The growth forecasts for the United States and China have been significantly reduced. The US growth rate was pegged at 6% by the IMF, down one percentage point, while China's was pegged at 8%, down 0.1 percentage point.

According to IMF Chief Economist Gita Gopinath, the advanced economy group is likely to reclaim its pre-pandemic trend path in 2022 and exceed it by 0.9 percent in 2024. "In 2024, aggregate output for the emerging market and developing economy group (excluding China) is likely to remain 5.5 percent below the pre-pandemic prediction, resulting in a bigger setback to increases in their living standards," she added. 

According to Ms Gopinath, the top policy priority is to vaccinate at least 40% of the population in each country by the end of 2021 and 70% by the middle of 2022. "This will require high-income countries to fulfill existing vaccine dose donation pledges, coordinate with manufacturers to prioritise deliveries to COVAX in the near-term and remove trade restrictions on the flow of vaccines and their inputs,” added the Indian-American economist.