A third wave of COVID-19 that leads to severe restrictions in public mobility will likely lead to another fall in India’s economic growth story, International Monetary Fund Chief Economist Gita Gopinath told NDTV today. Her comments came a day after the IMF cut its economic growth forecast for India to 9.5 per cent for fiscal 2022. The IMF’s latest forecast is largely influenced by the deadly Covid second wave that crippled a recovering economy.
“The second wave (of Covid) in India was really catastrophic, unlike what we have seen in the other parts of the world. It did hit India very hard,” Ms Gopinath said. “A third wave if it leads to less mobility will put India at risk of another downgrade,” she said.
India’s economy is gradually recovering from a deep contraction in the previous fiscal and the subsequent second wave. The IMF joins other global and domestic ratings agencies that have cut India’s growth estimates for the current fiscal. Last month, S&P Global Ratings projected a 9.5 per cent gross domestic product growth in the current fiscal and 7.8 per cent in fiscal 2023.
“This pandemic has been very hard on a lot of people. We are looking at close to 30 million people living in poverty. So support needs to be provided… India also has one of the largest population, so it’s difficult to have it (vaccination) done fast… 30% of the population will be vaccinated by the end of this year at this rate,” Ms Gopinath said. “Access to vaccine is a very important part of it (recovery). In advance economies, we have the number at 40 per cent of their population, so there’s a big divide,” the IMF Chief Economist said.
“Faster than expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of Covid cases in some countries, notably India, have led to downgrades,” Ms Gopinath said on Tuesday while announcing the growth forecast for India.
The world GDP will expand by 6 per cent this year, unchanged from the April forecast, but Ms Gopinath flagged the “widening gap” as advanced economies grow faster and developing nations, especially in Asia, slow.
Rising prices are another factor weighing on the global recovery, and pose a challenge to policymakers. And while the recent inflation spike is the result of the unprecedented and uneven turnaround from the pandemic and should prove temporary, the IMF raised the possibility that price increases could become “persistent.”