The International Monetary Fund (IMF) has recently revised its financial prediction for India in the year 2021, taking it up to a growth rate of 12.5% from the previously estimated 11.5% in January 2021. This change is noteworthy as it places India ahead of China in terms of economic growth.
The Indian Economy’s Performance
The Indian economy, according to IMF’s World Economic Outlook, is projected to expand by 12.5% in 2021 and 6.9% in 2022. This comes after a decrease of approximately 8% in 2020. The growth estimation for India in 2021 is stronger than that for China. It is interesting to note that China had been the only major economy to demonstrate a positive growth rate (2.3%) in 2020. Its growth for 2021 is anticipated to be 8.6%, and for 2022, it is expected to be 5.6%.
Overview of the Global Economy
In terms of the global economy, the IMF predicts a stronger recovery in 2021 and 2022, with projected growth rates of 6% in 2021 and 4.4% in 2022, following a contraction of 3.3% in 2020. This contraction value for 2020 is 1.1% points less than what was previously projected. This adjustment is credited to better-than-expected growth outcomes in most regions during the second half of the year as lockdown measures were relaxed and economies adapted to new methods of operation – all this coupled with additional fiscal support in some large economies and the anticipated vaccine-driven recovery in the latter half of the year.
Suggested Approaches and Priorities
With regard to navigating through the current health crisis, emphasis has been placed on prioritising healthcare spending – vaccination, treatments and healthcare infrastructure. Fiscal support should be well addressed towards households and firms that are most affected. As for monetary policy, it is recommended that it remains accommodating, with proactive steps taken to address financial stability risks using macroprudential tools. Policymakers are urged to continue supporting their economies while dealing with confined policy space and greater debt levels. This necessitates more precise and targeted measures to preserve space for prolonged support if required. Given the multi-speed recoveries, a customised approach is crucial, with policies well regulated to the stage of the pandemic, the strength of the economic revival, and the structural attributes of individual countries. Several priorities have also been highlighted, among them green infrastructure investment to mitigate climate change, digital infrastructure investment to bolster productive capacity, and strengthening social assistance to prevent escalating inequality.
About the International Monetary Fund (IMF)
Established in 1945, the IMF was set up alongside the World Bank after World War II with the objective of assisting in the reconstruction of countries ravaged by war. The decision to establish these two organisations was made at a conference in Bretton Woods in the US, which led to them being referred to as the Bretton Woods twins. Comprising nearly global membership, the IMF is governed by and responsible to the 189 member countries. India joined the IMF on the 27th December, 1945. The primary purpose of the IMF is to ensure the stability of the international monetary system, that is, the system of exchange rates and international payments that enable countries to transact with each other. In 2012, the Fund’s mandate was updated to include all macroeconomic and financial sector issues relevant to global stability.
Reports Released by IMF
The IMF releases the World Economic Outlook twice a year, in the months of April and October. This survey analyses and forecasts global economic developments in the near and medium term. Moreover, due to increasing demand for more frequent updates on forecasts, the WEO Update is published in January and July, set between the two major WEO publications typically released in April and October. Other key reports include the Global Financial Stability Report.
