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IMF’s World Economic Outlook

IMF’s World Economic Outlook

Why in news?

  • The latest World Economic Outlook of the International Monetary Fund (IMF) has estimated that India’s Gross Domestic Product (GDP) will grow by 11.5% in the Financial Year (FY) 2021-22.

Key Findings of the Report

  • Global Growth is projected at -4.4 percent (against an earlier projection of -5.2 percent.)
  • The growth projection in 2021 is 5.2 percent.
  • IMF stated that China would grow 8.1 per cent in 2021, followed by Spain (5.9 per cent) and France (5.5 per cent)
  • China was the only major country that registered a growth rate of 2.3 per cent in 2020. It is expected to expand at 5.6 per cent in 2022
  • Due to covid-19 crisis, there has been a disruption in both supply and demand in the global economy.
  • Some of the reasons for supply disruptions are:
    • Business closures
    • Infections following coronavirus
    • Lockdowns
    • Reduction in labour supply
    • Social distancing
  • Some of the reasons for demand disruptions are:
    • Loss of income arising from unemployment, the morbidity of quarantines.
    • Layoffs

Key Findings And Projections: India Specific

  • IMF revised its earlier forecast of an 8.8 per cent expansion in the Indian economy to 11.5% growth in FY22.
  • Also, as per IMF ‘India will emerge as the only key nation to record double-digit growth and reclaim the status of the world’s fastest-growing major economy’.                    IMF’s World Economic Outlook
  • For the fiscal year 2022, it had predicted a record 10.3 per cent contraction in the Indian Economy
  • In Financial Year 2023, the economy of India would most likely grow at 6.8 per cent
  • The latest revision for the current fiscal is higher than the government’s first advance estimate of 7.7% and also the RBI’s estimate of 7.5%.
  • Industrial production in India has been severely hit amid economic slowdown followed by the COVID-19 crisis.
  • The IMF’s World Economic Report of October 2020 mentions that India will be worst affected in both the short and long term.
  • IMF’s WEO proposed that Bangladesh’s per capita income is expected to be higher than India’s in 2020.

Key Findings: Government Measures To Deal With The Pandemic

  • Reserve Bank of India’s Covid19 Economic Relief Package
  • Pradhan Mantri Garib Kalyan Yojana: The government announced Rs 1.70 lakh crore relief package under the newly framed Pradhan Mantri Garib Kalyan Yojana for the poor to help them fight the battle against covid-19.
  • Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission): The Self-Reliant India Mission aims towards cutting down import dependence by focussing on substitution while improving safety compliance and quality goods to gain global market share.                            IMF’s World Economic Outlook
  • Government announced liquidity measures for businesses, especially Micro, Small and Medium enterprises (MSMEs) under the Atmanirbhar Bharat Abhiyan.

IMF Addresses Economic Inequality

  • As per the IMF, ‘Efforts can be complemented with investment in retraining and reskilling programs to improve reemployment prospects for displaced workers, strengthening social assistance as needed, and expanding social insurance (relaxing eligibility criteria for unemployment benefits, extending the coverage of paid family and sick leave).                          IMF’s World Economic Outlook
  • All of this would help address the uneven labour market impact of the crisis and curb rising inequality.’
  • As per the report, the pandemic is expected to reverse the progress made in poverty reduction across the past two decades.

Measures Needed For India To Revive Its Growth

  • Reduce the public sector’s role in the financial system, reform the hiring and dismissal regulations.
  • Use monetary policy and broad-based structural reforms to address cyclical weakness and strengthen confidence.                                    IMF’s World Economic Outlook
  • A credible fiscal consolidation path is needed to bring down India’s elevated public debt over the medium term.

This should be supported by subsidy-spending rationalisation and tax-base enhancing measures.  IMF’s World Economic Outlook

 

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