The Indian economy is expected to recover significantly in the coming financial year. The International Monetary Fund (IMF) has shown this in its latest World Economic Outlook report. The IMF expects India’s economy to grow at the fastest pace of 11.5 per cent for the coming financial year. In this way, India can become the fastest growing country in 2021. Earlier the IMF in its report released in October had projected a growth rate of 8.8 per cent for the coming financial year.
At the same time, the IMF has projected India’s GDP growth to be (-) 8 percent for the current financial year. Earlier the IMF had projected GDP growth rate of (-) 10.3 per cent for the current financial year. Also, the IMF has expected India’s GDP to grow at 6.8 per cent for the fiscal year beginning in April 2022.
The International Monetary Fund reported that they had projected global growth of 5.5 percent for the year 2021. Also, the IMF said that it would depend more on the virus and vaccine output.
Among the economies whose growth forecast for the year 2021 has been released, the highest growth estimate is for the Indian economy only. In 2021, the IMF forecasts GDP growth of 5.1 for the US, 3.1 for Japan, 4.5 for the UK, 8.1 for China, 3.0 for Russia, and 2.6 per cent for Saudi Arabia.
The IMF forecasts 2.5 percent growth in the US economy for the year 2022. Apart from this, the IMF for the year 2022 has forecast GDP growth as 4.1 percent in the French economy, 3.6 percent in Italy, 4.7 percent in Spain, 2.4 percent in Japan, 5 percent in the UK, 4.1 percent in Canada, 5.6 percent in China, 4 percent in Saudi Arabia, 2.6 percent in Brazil and 1.4 percent in South Africa.
Last year, that is, for the year 2020, the IMF has forecast a growth of -3.4 percent in the US economy. Apart from this, the IMF for the year 2020 has -9.0 per cent in France’s economy, -9.2 per cent in Italy, -11.1 per cent in Spain, -5.1 per cent in Japan, -10 per cent in the UK, -5.5 per cent in Canada, 2.3 per cent in China. , -3.9 per cent in Saudi Arabia, -4.5 per cent in Brazil and -3.9 per cent in Southern Africa.
The IMF’s forecast is no surprise
Mohit Ralhan, managing partner and chief investment officer of TIW Private Equity, said on the IMF’s forecast, “IMF has raised the GDP growth forecast for the Indian economy to 11.5 per cent from the earlier 8.8 per cent for FY 2022. It has also raised its forecast for FY 2021 from -10.3 per cent to -8 per cent. There were signs of recovery in the Indian economy from the last quarter itself and we are also seeing changes in our portfolio companies. The economy has undergone better recovery than expected due to timely steps taken by the government and policy support. GST Collection, Industrial Production, Key economic indicators such as unemployment rate and manufacturing PMI are again coming back to old levels and some have even crossed the pre-Covid-19 level. Therefore, this IMF forecast is not surprising. India is growing at a fast pace and is expected to become an important growth engine for the world in the coming decade.”
The growth rate may also exceed the IMF forecast
On the IMF’s forecast, Waqar Naqvi, CEO of Taurus Mutual Fund said, “It is no surprise that the growth rate of 11 per cent for India in FY 2022 and low estimate due to Corona epidemic in FY 2021 is not surprising. The demand that was suppressed due to Corona epidemic is now coming to the fore. The fact that vaccination has started with the upbeat mood of the public has apparently become well psychologically adjusted for India with COVID-19. If the central government announces steps to stimulate demand in the forthcoming budget to be presented on 1 February, it would be no surprise that we also exceed the IMF’s forecast.”
Significant increase in investment
Commenting on this IMF forecast, Raghavendra Nath, MD, Ladderup Wealth Management, said, “11 percent growth is possible in the next financial year and this is a normal thing. The Indian economy is on the improving and the affected sectors of the economy like retail, entertainment, hotels, tourism etc. are also returning to normalcy. The government has tried to move the economy forward with a lot of expenditure. More spectacular news would be that this growth rate can be maintained for 3-4 years, which is not possible at present unless there is some significant increase in investment in the economy from private, public and foreign participants.”