The International Monetary Fund (IMF) has slashed India’s growth projection significantly since its last forecast in April, reflecting a longer period of lockdown and slower recovery than anticipated earlier.

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In its latest World Economic Outlook update, IMF has predicted a 4.5 percent contraction for India’s GDP in the current financial year. This is lower by 640 basis points, or 6.4 percent, compared to its earlier forecast of 1.9 percent GDP growth for FY21 given in April. Among all the countries covered in IMF's forecast, India has been handed the sharpest cut when it comes to growth projections for this year.

Post this period of contraction, IMF has projected a 6 percent growth for India in FY22. However, IMF has warned that there is a higher-than-usual degree of uncertainty around its forecast owing to the assumptions made regarding the fallout from the COVID-19 pandemic.

“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 tightened financial conditions, triggering debt distress,” IMF’s Chief Economist Gita Gopinath noted in her blog accompanying the report.

India’s GDP growth slowed down to 3.1 percent for the quarter ending March 2020, while its growth for the full financial year FY20 stood at 4.2 percent. This is the lowest growth that India has recorded in the past 11 years.

While the impact of the global pandemic was felt only in the last quarter of FY20, India’s economy had been slowing even before that. The National Statistical Office (NSO) also revised growth numbers for the first three quarters of FY20 in its last release in May. India’s Q1 GDP growth stood at 5.2 percent, Q2 GDP growth at 4.4 percent, and Q3 GDP growth was at 4.1 percent after the revisions.

First Published:Jun 24, 2020 6:31 PM IST