Gita Gopinath, chief economist IMF
Gita Gopinath said the economic downturn in India was "incredibly deep this year" and the IMF has predicted the Indian economy will contract by 4.5 per cent in 2020.
India will grow at slightly over 1 per cent over 2020 and 2021, Gita Gopinath, chief economist of the International Monetary Fund (IMF) said on Thursday, as the global agency found that the coronavirus pandemic has caused wider and deeper damage to economic activity than first thought.
"If you look at the growth projection for 2020 and add 2021, over two years, growth in India will be slightly over 1 per cent. That is not a very strong growth picture but it is similar to many other countries around the globe," Ms Gopinath told in an interview.
The IMF on Wednesday evening predicted the Indian economy would contract by 4.5 per cent in 2020. It also expects global output to shrink 4.9 per cent this year, a sharper fall than the 3 per cent contraction predicted in April.
"We have an incredibly deep downturn in India this year. And as you have reopening, as the health crisis abates, as the global economy recovers, India will also recover," Ms Gopinath said.
Asked about what advice she would give to Prime Minister Narendra Modi, she said, "India needs to expand its testing capacity, some more budget spending would also help which is more direct cash and in-kind support for vulnerable people and also SMEs (small and medium enterprises, and the third is to recognise that this is an opportunity to strengthen reforms."
China, where businesses started reopening in April and new infections have been minimal, is the only major economy now expected to show positive growth in 2020, now forecast at 1 per cent compared to 1.2 per cent in the April forecast.
"China, among the larger economies, is the one with positive growth. It's hard to find another one. Their recovery is also strongest. This reflects that they have had a much quicker success in containing the virus, having briefer containment periods," she added.
The IMF views the current recession as the worst since the 1930s Great Depression, which saw global GDP shrink 10 per cent, but Ms Gopinath has said that the $10 trillion in fiscal support and massive easing by central banks had so far prevented large-scale bankruptcies. More support will be needed, she added.
"The first half of the year had the deepest contraction. Now we are seeing a reopening, a spurt of activity. But the health crisis is not over and you are going to have future waves. There is tremendous uncertainty. So the recovery may start out being quick but will be prolonged in our opinion," Ms Gopinath said.
The pandemic will wipe out $12 trillion over two years, the IMF has said, with worldwide business shutdowns destroying hundreds of millions of jobs, and major economies in Europe face double-digit collapses.
The prospects for recovery post-pandemic -- like the forecasts themselves -- are steeped in "pervasive uncertainty" given the unpredictable path of the virus, the IMF said in its updated World Economic Outlook.