According to latest report by IMF, India is set to drop below Bangladesh in terms of per capita Gross Domestic Product (GDP) as the economy is projected to contract by a massive 10.3 per cent this year. The IMF’s forecast for India, a huge downward revision from its previous prediction in June, will see the biggest contraction among major emerging markets amid the coronavirus pandemic.
‘World Economic Outlook’ report released on Tuesday says India’s per capita GDP is set to plunge to $1,877 this fiscal year ending on March 31, 2021. The IMF’s previous prediction in June said output would shrink 4.5 per cent. Bangladesh per capita GDP in dollar terms is expected to grow to $1,888, according to the IMF report.
With these projections, India will be the third poorest country in South Asia. Pakistan and Nepal are will be only countries with lower GDP. The IMF predicted that Sri Lanka will be the second most affected after India. Sri Lanka’s per capita GDP is expected to shrink 4.6% in the current calendar year.
However, India is likely to bounce back with an impressive 8.8 per cent growth rate in 2021, thus regaining the position of the fastest-growing emerging economy, surpassing China’s projected growth rate of 8.2 per cent, the IMF said.
Also, the global growth would contract by 4.4 per cent this year and bounce back to 5.2 per cent in 2021. America’s economy is projected to contract by 5.8 per cent in 2020 and grow by 3.9 per cent the next year, the IMF said. China is the only country, among the major economies, to show a positive growth rate of 1.9 per cent in 2020.
Among the other countries in the BRICS group, Brazil’s economy will contract 5.8 per cent, Russia 4.1 per cent, South Africa 8.0 per cent while China will grow 1.9 per cent, according to the IMF’s report.
“India’s economy is likely to contract 9.5 per cent in the current financial year with risks tilted to the downside,” said RBI Governor Shaktikanta Das.
“We think that there is room to recalibrate and to provide more direct relief and spending support, which could have a first-order impact on preventing even worse outcomes,” said Malhar Shyam Nabar, division chief of the research department at IMF.
“Now, if this worsens and prospects for treatments and vaccines deteriorate, the toll on economic activity would be severe and likely amplified by severe financial market turmoil,” said Gita Gopinath, the IMF’s chief economist.
It would be interesting to see how India will set reform measure to set targeted goals within achievable sight.