India will contract 4.5% in the current fiscal year, according to latest projections released by the International Monetary Fund (IMF) as part of their June 'World Economic Outlook Update'. This represents a 6.4 percentage point swing from their April update, when the IMF had predicted a modest 1.9% growth for the Indian economy.
"India's economy is projected to contract by 4.5 percent following a longer period of lockdown and slower recovery than anticipated in April", the report says. An economic contraction, contrary to growth, is when an economy becomes smaller over a given period of time.
These are the latest figures coming out of a major institution in a series of estimates coming out of research houses and brokerages that see India's growth in negative territory this year. Rating agencies such as Fitch Ratings and CRISIL see India's economy contracting by 5%. The research desk of the State Bank of India estimates this to be at 6.8%. HSBC India estimates a 7.2% fall. Even the governor of the Reserve Bank of India believes that India will witness an economic contraction, and said so in a media interaction on May 22, but stopped short of providing an estimate.
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The IMF's report, titled 'A Crisis Like No Other, An Uncertain Recovery', the report predicts the global economy will contract -4.9% in 2020, and spells out some ominous numbers for the global economy as a whole. However, the report does predict 5.4% growth for the world in 2021, and 6% growth for India in 2021 (fiscal year 2022). The report shows that major economic regions in the world, such as the United States, the Euro area, Japan, Brazil, the United Kingdom and South Africa, will have negative growth. Among major economies, only China is expected to grow at 1% this year.
You can view the estimates by interacting with the graph below
'More Severe Economic Fallout Than Expected'
The IMF has labelled the ongoing economic fallout as unprecedented, breaking down various sections of the economy bit by bit an giving an overview on them.
On individual growth, the IMF says that first quarter growth has been worse than expected, barring a few countries, including India. High-frequency data also points towards a severe downturn, it says. The employment scenario doesn't look good either, with the IMF stating that 80% of the 2 billion (200 crore) informal workers around the globe have borne the brunt of the downturn (citing the International Labour Organisation). The 2nd quarter of 2020 is estimated to see a decline of roughly 300 million jobs. Trade and tourism too have been hit, declining 3.5% in the first quarter (year-on-year).
But government have been stepping up their support to help mitigate the fallout. Globally, governments have committed $11 trillion in fiscal measures to contain the damages, up from $8 trillion calculated in April. On India, the IMF said, "India has unveiled liquidity support (4½ percent of GDP) through loans and guarantees for businesses and farmers and equity injections into financial institutions and the electricity sector." The average fiscal support, as a percent of GDP for emerging economies, stands at 5%, and is lower than developed economies.
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The report and the accompanying data can be downloaded from here.