Home
>
Articles
>
IMF upgrades India's GDP growth forecast

IMF upgrades India's GDP growth forecast

Last updated: 27 Jan, 2021 | 09:44 am

IMF upgrades India's GDP growth forecast

Indian economy to rebound in FY22

  • The  IMF has upgraded its forecast on India’s GDP growth in the upcoming years (FY22 and FY23). The Indian economy is estimated to see a strong rebound and grow at 11.5% in the April 2021 to March 2022 period, the IMF said, upgrading its earlier forecast of an 8.8% expansion.
  •  With this, India will emerge as the only key nation to record a double-digit growth and reclaim the status of the world’s fastest-growing major economy. India’s real gross domestic product (GDP) shrank as much as 8% in FY21 due to the Covid-19 pandemic. In FY23, the economy will likely grow 6.8%. The table below compares India’s forecast with other countries.
  • According to the IMF, India has taken very decisive action to deal with the pandemic, and its economic consequences.

RBI expects rebound

  • In a recent report, the RBI has indicated that the Indian economy is expected to post positive in the Oct-Dec 20 period. It further predicts a V-shared recovery in FY21, driven by the rollout of the vaccine. 
  • High-frequency indicators like government expenditure in key growth-focused projects, pickup in merchandise trade, bank credit and high manufacturing activity in December 2020 are a sign of better recovery of the economy, according to the RBI.
  • Since mid-September, India has done well to flatten the curve of Covid-19 cases. The number of active cases had fallen to 2.5 lakh from a peak of 10.17 lakh on September 17. 
  • The recovery rate in India has improved to 96.1%, the second-highest in the world. The mortality rate is 1.4%, lower than the world death rate (2.2 per cent), and the second-lowest among countries with over a million infections. 
  • The government has estimated that India's real GDP will decline by -7.7% in Apr-Mar 21 period. This is in-line with RBI’s forecast of  -7.5% in FY21.

Key indicators including Core Sector Data, Manufacturing and Services PMI, auto sales data indicate that the economy is on the road to recovery, though a full-blown recovery seems to be at least a few months away. The advanced estimates of GDP by IMF and RBI have come in better than expected,  after the marginal recovery seen in Q2 GDP. The positive growth forecast in Q3FY21 would come as a welcome relief, as the economy is formally in recession after two consecutive quarters of decline in GDP growth. While this is an indication of sustained recovery, festive season and the supply side push helped the ailing economy. Unless we see efforts to revive demand, this could come under threat, going forward.

We are a SEBI registered investement advisor