NOT OUT OF THE WOODS YET: GOPINATH

IMF SAYS IN­DIA’S ECON­OMY TO CON­TRACT BY 4.5% AMID PAN­DEMIC

Hindustan Times (Jalandhar) - - FRONT PAGE - Asit Ran­jan Mishra asit.m@livemint.com

NEW DELHI: The In­dian econ­omy will con­tract 4.5% in the cur­rent fis­cal, the In­ter­na­tional Mone­tary Fund (IMF) said on Wed­nes­day, re­vers­ing its rather op­ti­mistic 1.9% April growth fore­cast, as the lock­down-re­lated dis­rup­tions to do­mes­tic ac­tiv­ity turned out to be more se­vere than it had ex­pected. For the next fis­cal, IMF tem­pered its growth fore­cast to 6% from the 7.4% it es­ti­mated in April, ac­cord­ing to its World Eco­nomic Out­look (WEO) up­date.

Since the IMF re­leased its pre­vi­ous up­date in April, the pan­demic swept across coun­tries, in­clud­ing In­dia, ne­ces­si­tat­ing strin­gent lock­down mea­sures for a longer pe­riod. This re­sulted in se­vere dis­rup­tions to eco­nomic ac­tiv­ity and mas­sive job losses. In­dia has now lifted nearly all curbs on travel and busi­nesses to the econ­omy. “We are def­i­nitely not out of the woods. We have not es­caped the Great Lock­down,” IMF chief economist Gita Gopinath said. “Given this tremen­dous un­cer­tainty, pol­i­cy­mak­ers should re­main vig­i­lant.”

Most fore­cast­ing agen­cies now ex­pect the In­dian econ­omy to con­tract 3-5% in the cur­rent year with var­ied pro­jec­tions of a re­bound in FY22. In­dia Rat­ings on Wed­nes­day pro­jected the econ­omy to con­tract by 5.3% in FY21 and pre­dicted a re­vival in the range of 5-6% in FY22, aided by a lower base in the pre­ced­ing year and a re­turn of grad­ual nor­malcy in the do­mes­tic as well as the global econ­omy.

While not­ing In­dia has un­veiled liq­uid­ity sup­port (4.5% of GDP) through loans and guar­an­tees for busi­nesses and farm­ers and eq­uity in­jec­tions into fi­nan­cial in­sti­tu­tions and the elec­tric­ity sec­tor, IMF said coun­tries where fis­cal space is lim­ited need to re­ori­ent rev­enue and spend­ing to in­crease and en­cour­age pro­duc­tive in­vest­ment. “All mea­sures should be em­bed­ded in a medium-term fis­cal frame­work and trans­par­ently man­aged and recorded to mit­i­gate fis­cal risks, in­clud­ing loans and guar­an­tees that do not have an im­me­di­ate ef­fect on gov­ern­ment debt and deficits,” IMF said.

HT

For the next fis­cal, IMF tem­pered its growth fore­cast to 6% from the 7.4%.

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