New Delhi: The International Monetary Fund (IMF) on Tuesday upgraded its growth projection for India to 12.5% for FY22 from 11.5% estimated in January, even as more states imposed mobility restrictions amid intensifying second wave of the pandemic, thus creating uncertainty about growth outlook for Asia’s third largest economy.

“For the emerging and developing Asia regional group, projections for 2021 have been revised up by 0.6 percentage point, reflecting a stronger recovery than initially expected after lockdowns were eased in some large countries (for example, India),” IMF said in its biannual World Economic Outlook.

IMF chief economist Gita Gopinath said a high degree of uncertainty surrounds the projections. “Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multi-speed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways. This could cause inflated asset valuations to unwind in a disorderly manner, financial conditions to tighten sharply, and recovery prospects to deteriorate, especially for some highly leveraged emerging markets and developing economies,” she added.

The report said in emerging market and developing economies, vaccine procurement data suggest that effective protection will remain unavailable for most of the population in 2021. “Lockdowns and containment measures may be needed more frequently in 2021 and 2022 than in advanced economies, increasing the likelihood of medium-term scarring effects on the potential output of these countries,” it added.

Gopinath said divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations. The average annual loss in per capita GDP over 2020-24, relative to pre-pandemic forecasts, is projected to be 5.7% in low-income countries and 4.7% in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3%. Such losses are reversing gains in poverty reduction, with an additional 95 million people expected to have entered the ranks of the extreme poor in 2020 compared with pre-pandemic projections.

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