As the current fiscal year is coming to an end, India’s prospects of economic recovery amid the restrictions due to spread of the Omicron variant of Corona is being watched with interest in the country as well as abroad. It is because India is expected to act as engine of growth to drive the global economy out of the post COVID-19 recession.
Although the World Bank and the IMF are upbeat about economic recovery of India they have revised down economic growth rate due to uncertainties caused by the COVID-19 pandemic and consequent demand and supply shocks. It also projected that the global economic recovery would also be slower than the earlier forecast.
The World Bank’s global economic prospectus report released on January 25, 2022 retained its forecast for India’s GDP growth for FY 2021-22 (April-March) at 8.3%. The World Bank’s projections came just after India’s government advance estimates projected India’s GDP to grow at 9.2% in the current financial year. The forecasts for 2021 and 2022 were 0.2 percentage points lower than in the bank’s June Global Economic Prospects report. The International Monetary Fund is also expected to downgrade its growth forecasts in its update on 25 January.
The World Bank also forecasted global growth to decelerate “markedly” to 4.1% in 2022 from 5.5% last year, and drop further to 3.2% in 2023 as pent-up demand dissipates and governments unwind massive fiscal and monetary support provided early in the pandemic. While forecasting growth rates for the United States, the Euro area and China it warned that high debt levels, rising income inequality and new Covid-19 variants threatened the recovery in developing economies. However the bank’s latest semi-annual forecast cited a big rebound in economic activity in advanced and developing economies in 2021 after contractions in 2020, but warned that longer-lasting inflation, ongoing supply chain and labor force issues, and new Covid-19 variants were likely to dampen growth worldwide.
The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) had cut its economic growth forecast for India to 9.5% for the fiscal year to March 31, 2022 in July 2021 as the onset of a severe second COVID-19 wave cut into recovery momentum. This forecast for 2021-22 is lower than the 12.5% growth in GDP that IMF had projected in April before the second wave took a grip. For 2022-23, IMF projected India’s economic growth at 8.5%, larger than the 6.9% it had projected in April.
IMF joins a host of global and domestic agencies which have cut India’s growth estimates for the current fiscal. Last month, S&P Global Ratings projected a 9.5 % GDP growth in the current fiscal and 7.8 % in 2022-23. While World Bank sees GDP growth at 8.3 % from April 2021 to March 2022, the Asian Development Bank (ADB) last week downgraded India’s economic growth forecast to 10 % from 11 % estimated in April. Another US-based rating agency Moody’s has projected India clocking 9.3 % growth in the current fiscal ending March 2022. For 2021 calendar year, Moody’s has cut the growth estimate sharply to 9.6 %. The GDP, which shrank from $2.87 trillion in 2019-20 to $2.66 trillion in the following year, is estimated to reach around $4 trillion in 2024-25.
The IMF in its July report projected the global economy at 6 % in 2021 and 4.9 % in 2022. The 2021 global growth forecast is unchanged from the April 2021 WEO, but with offsetting revisions that is the composition of growth drivers has changed. “These revisions reflect important extent differences in pandemic developments as the delta variant takes over. Close to 40% of the population in advanced economies has been fully vaccinated, compared with 11% in emerging market economies, and a tiny fraction in low-income developing countries. IMF estimates the pandemic has reduced per capita incomes in advanced economies by 2.8 %, relative to pre-pandemic trends over 2020-2022, as compared with an annual per capita loss of 6.3 % a year for emerging market and developing economies (excluding China).
In all these estimates India remains to be the fastest growing big economy in the world.