In the middle of a sharp diminution in the global economy, the International Monetary Fund on Tuesday cut India’s GDP growth rate to 1.9 percent in the fiscal year 2020-21. Also, it mentioned that the economy is expected to revitalize in fiscal 2021-22.

COVID-19 has proved itself to be a huge shock, and the output loss associated with this pandemic is likely to surpass the losses activated by the global financial crisis. Also, similar to any national emergency, presently, there is continued uncertainty about the extent and severity of the shock.

“This time, the crisis is, to a large extent, the consequence of needed contain measures. This makes the stimulating activity more challenging and, at least for the most affected sectors, undesirable”, writes the IMF Economic Counsellor, Gita Gopinath, in the foreword to the report titled ‘The Great Lockdown.’ The complete report to be released next month.

According to the report, India’s GDP growth rate has been projected at 1.9 percent for the year 2020-21 ( 5.1 percent lower than the October projection and 3.9 percent lower than the January outlook). However, the GDP growth rate is expected to leap to 7.4 percent during 2021-22.

Also, the report mentioned Asia to be the only region with a positive growth rate in 2020 (1 percent), although it fell more than 5 percentage points below its average in the previous decade. The industrial production, retail sales, and fixed-asset investment in China indicate that the decrease in economic pursuits in the first quarter could be 8 percent year over year. The report stated, “Several economies in the region are forecast to grow at modest rates, including India.”

Assuming that this global breakout declines in the second half of 2020, the report said the global economy is estimated to grow by 5.8 percent in 2021 as the world economy normalizes.

The Great Lockdown

The national lockdown, caused by the fatal pandemic prevailing around the globe, is expected to shrink global growth strikingly. This year is most likely to experience the worst recession since the Great Depression, belittling the global financial crisis a decade ago.

Gopinath also said that developing and emerging economies are more severely hit and even worse growth outcomes are possible and likely.

Also, a partial recovery is predicted for 2021 with considerable uncertainty about the intensity of the recovery.