COVID Impact: IMF Says India’s Economy to Contract By 4.5% in 2020

File image of Gita Gopinath, IMF’s Chief Economist.

(Photo: Altered by The Quint)

The International Monetary Fund (IMF) on Wednesday, 24 June, predicted a sharp contraction of 4.5 percent for the Indian economy in 2020, however, it added that India is expected to bounce back in 2021 with a 6 percent growth rate.

Global growth, too, is projected to be at -4.9 percent in 2020, 1.9 percentage points below the April forecast, followed by a partial recovery, with growth at 5.4 percent in 2021.

Indian-American Gita Gopinath, IMF’s Chief Economist, wrote, “The COVID-19 pandemic pushed economies into a Great Lockdown, which helped contain the virus and save lives, but also triggered the worst recession since the Great Depression.”

"We are now projecting a deeper recession in 2020 and a slower recovery in 2021," Gopinath added.

Calling the contraction a "historic low", she added, “We are projecting a synchronised deep downturn in 2020 for both advanced economies (-8 percent) and emerging market and developing economies (-3 percent; -5 percent if excluding China), and over 95 percent of countries are projected to have negative per capita income growth in 2020.”

The 2020 projection for India is a massive -6.4 percent less than the April forecast of the IMF, PTI reported. The projected growth rate of 6 percent in 2021 is -1.4 percent less than its April forecast.

“On the upside, better news on vaccines and treatments, and additional policy support can lead to a quicker resumption of economic activity. On the downside, further waves of infections can reverse increased mobility and spending, and rapidly tighten financial conditions, triggering debt distress.”

Gita Gopinath, IMF’s Chief Economist