The International Monetary Fund (IMF) has predicted a 10.3 per cent contraction in India’s economy in 2020-21. This means the country may see the biggest GDP growth dip among big economies, the worst in decades. This is the second downgrade for India by the IMF after it reversed its forecast of 1.9% growth in April to a 4.5% contraction in June for 2020-21.
And no bounce back is likely before 2021. So, the biggest question of our time is: How to put the India story back on track in the age of Covid-19? Also, how dire could it get before there is a revival?
India Today TV Consulting Editor Rajdeep Sardesai asked these and many other critical questions to the IMF’s Chief Economist, Gita Gopinath, who joined his show News Today at 9 from Washington DC.
What explains this drastic change in the IMF’s prediction for India’s economy?
“There is a surge in the pandemic. The duration of the containment measures has been longer. There has been a collapse of various activities,” Gita Gopinath said.
Will the recovery, if at all any, be slow?
“The next quarter’s growth will be better. But the pace of the recovery is going to be slow till 2023. This is not transitory, it’s medium-term effect,” she said.
But India seems to have taken a bigger hit. Even Bangladesh seems to be doing better than us. How do you see that?
“Initially, it looked like that it would be controlled. But you will see a return. But again, lockdown has hit many economies across the world,” Gita Gopinath said.
Government agencies are talking about a V-shape recovery. What’s your view?
“There is no V-shape trajectory. You’ll see a rebound in growth. It will be a partial recovery. The recovery will be more like a combination of V and L. It will be gradual,” she said.
Did India get something wrong in the last six months?
“It’s an unprecedented crisis. Countries deal with their specific problems,” Gita Gopinath said while not getting into criticism.
To a question as to what could be done in the next two quarters, she said the size of the fiscal package deployed is big, about 7 per cent of India’s GDP, but there is a need to do more on the direct spending component.
Is this a recognition of the scale of the crisis?
“We have seen big steps in reforms (farm bills) and on the supply side. These were needed changes. A lot depends on their implementation. There is a need to re-evaluate the schemes announced,” Gita Gopinath said.
There is a big concern that Bangladesh’s GDP growth may outstrip India’s. How do you view that?
“India is a major economy. We need to see what can be done to come out of it. India has a lot of potential. It was the fastest growing major economy. It has a young demographic. You have to get your policy in place to get back to the 2019 level,” she said.