India’s growth rate could be over 7% in 2021 if it controls the coronavirus outbreak: IMF

According to the International Monetary Fund’s mission chief for India, India’s growth rate could bounce back to over 7% again in 2021. However, it will be possible if India can bring the coronavirus outbreak under control.

The IMF made predictions during its virtual spring meeting. It stated that for the fiscal year that ends on March 31, 2021, India would grow 1.9%. It also said that pandemic will bring large swathes of industries worldwide to a halt. However, despite this, many economies are expected to register an expansion. It says that India will be one of these few major economies, alongside China. IMF further projected that for the following fiscal year, the Indian economy could grow 7.4%.

Ranil Salgado said that even as large uncertainties linger, the forecast builds on the assumption that several things need to happen first.

He said that first of all, it is based on control of the pandemic. It will be followed by ending the lockdowns. It will later be determined by the stimulus that is already in place in India. It is in terms of monetary policy and some initial steps on fiscal policy as well. He further added that India also gets a tailwind from the lower oil prices.

Salgado explained that India is quite resilient. It has very large external buffers and reserves. It boosts the country’s potential ability to step up fiscal spending.

Salgado added that the priority remains in meeting all of the country’s health-care needs. However, he hoped to see further support for the more vulnerable businesses and households in India.

A $22.5 billion fiscal package has been announced by Prime Minister Narendra Modi to help millions of daily wage earners left without work and low-income households. Many of these work in the grey or informal sector of the economy.

The supply of manpower has been hurt by large-scale lockdowns. In the agriculture industry, it has also disrupted supply chains. However, as believed by Salgado, India has substantial food buffer.

Salgano said that the government is concerned about ensuring adequate food supplies. It is making an effort to do that. He added that it’s important that India returns to its path of undertaking long-term reforms when the economic shock passes.