The International Monetary Fund has cut India's growth projections to 9.5% from 12.5% in the ongoing financial year (April 2021 to March 2022). This is a sharp cut of 300 basis points, and is relative to growth projections it had for the Indian economy in its April WEO. One basis point is a hundredth of a percentage point.
This downgrade comes in its latest projection data according to the July update to its World Economic Outlook [WEO] report, released earlier today.
In calendar year terms, India will grow 8.8%, the data says.
"Growth prospects in India have been downgraded following the severe second COVID wave during March–May and expected slow recovery in confidence from that setback", says the report. Further, it says that recovery is not assured anywhere, even in places where the infection rate is low, as long as the virus circulates elsewhere.
The period between April and July also saw recoveries being slowed down due to severe outbreaks.
"Recovery has been set back severely in countries that experienced renewed waves— notably India", said the report. Even countries like the United Kingdom had to postpone their reopening plans. China's Guangdong province saw fresh restrictions while Australia saw a spate of fresh lockdowns in June.
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Titled 'Fault Lines Widen in the Global Recovery', the report talks of an widely divergent recovery in the global economy. The principle fault line to have emerged in the recovery is vaccination, where advanced and rich economies exceed, which would permit nearly all of them to return towards normalisation towards the end of this year. On the other hands, poor vaccination rates still plague underdeveloped and emerging market economies, keeping death tolls high and concerns for fresh outbreaks alive.
Though the world economy is still slated to grow 6%, it comes with counterbalancing revisions. While prospects for the emerging markets have been marked down for 2021, especially in Emerging Asia, the projections for advanced economies, notably the United States, have been revised upwards. The United States is expected to grow 7% this year.
"Growth prospects for advanced economies this year have improved by 0.5 percentage point, but this is offset exactly by a downward revision for emerging market and developing economies driven by a significant downgrade for emerging Asia", says the Chief Economist of the IMF, Gita Gopinath in a blog post.
Here's how select economic jurisdictions in the world economy will fare.
The IMF's latest data puts its forecasts at par with that of the Reserve Bank of India, which also forecasts 9.5% growth. In his June address, Governor Shaktikanta Das announced that the RBI has cut India's growth estimates by a percentage point from 10.5%.
The latest WEO by the IMF can be read here.
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