India needs to grow rapidly for contraction during COVID-19 epidemic: IMF

India, which is projected to grow at an impressive rate of 12.5% ​​this year, needs to grow at a much faster pace to the unprecedented contraction of 8% that was seen during the COVID-19 epidemic in 2020, one of According to senior International Monetary Fund (IMF) officials.

Petya Kova Brooks, Deputy Chief Economist of the International Monetary Fund, in an interview PTI On Friday, a strong case was also made for an additional economic stimulus to address the impact of the epidemic on the nation’s economy.

“When it comes to India, there was a big fall of output in the last financial year and the number as you mentioned is eight. Therefore, we are very happy to see a strong rebound this year with projected growth of 12.5% ​​for fiscal year 21-22 and we are also seeing high frequency indicators including PMI (Purchasing Manager Index), and trading and more mobility indicators Joe said he said continued recovery continued in the first quarter of this year.

Ms. Brooks said the local lockdown has some recent emergencies of new variants, which are seen as one of the dangers of this recovery, Ms. Brooks said.

“On recovery, when it comes to a level in terms of production levels, we are expecting that level to return to pre-crisis year of this financial year from 2019. This is in our estimates. However, if you look at a concept of scarring that compares what the level of production would not have been in 2024, it was not the crisis we are using. Then and compare where our current development trajectory is for India that the gap is huge, ”said Ms. Brooks.

The gap, she said, which is 8% of GDP, is large enough for the world as a whole.

“It’s almost three for the world as a whole [%], Which is another way of saying that even though we have this real rebound in the near term, there is still scope to see higher growth in the coming years that will shrink and hopefully, eliminate that shortfall. Karega, which we are currently looking forward to, ”the top IMF official said in response to a question.

“If we just thought about the level of production that it was before an epidemic happened, then this catch would happen this year, which is not surprising given the very high level of inherent under-development of India. But again, if we compare it to the route to be done without an epidemic, then we are getting a lot of gaps there, ”she said.

Noting that the Indian government has taken several steps to address the COVID-19 crisis, Ms. Brooks said, “We have seen policy responses, which have been coordinated and carried out in many areas.” We have seen that along with fiscal aid, monetary easing, liquidity and regulatory measures were also taken. ”

“What is meant is to maintain a focus on having a coordinated policy response as it is to prevent long-term damage to the economy. It will be particularly important to provide support to small and medium-sized firms as well as vulnerable households, ”she said.

Ms Brooks said that the IMF greatly welcomed the measures announced by India during its budget. This is particularly helpful for maintaining an adjusted fiscal stance and emphasizing expenditure on health and infrastructure.

“We estimate that the positive impact of the measures for this fiscal year is going to be on the order of six percentage points on growth,” she said, adding that many of the measures announced in the budget were in line with the IMF’s advice.

Chief among them is that there will be no withdrawal of fiscal stimulus at the general government level and that state governments will be given temporary flexibility to go to the ceiling of their budget. And last, but not least, is the fact that some other budget items on food subsidies were actually brought into the budget. Overall, the IMF greatly supports this focus on development.

At the same time, Ms. Brooks made a strong case for an additional economic stimulus.

“We think additional fiscal stimulus will be helpful. Re-focusing that stimulation on the weakest is something that makes sense for us. We note that some income support schemes were not extended in November 2020 and beyond.

It would be particularly useful to take measures in that area and at the same time it would also be helpful to ensure that priority is spent on education, the economist said.

“Last, but not least, also ensuring that there is a very solid medium-term fiscal framework is an area where we can see some room for more work in that area,” she said.

“Now, when it comes to monetary policy, we think that it makes sense to keep the monetary policy stance in view of the underlying sluggishness in the economy. This is what we understand is currently being planned. “

“It is our long-standing recommendation that we see scope for additional policy measures to address weaknesses in the financial sector, in the banking sector, in the non-bank part of the financial sector. We think this is going to be particularly important because we are going to get out of the crisis and promote efficient debt arbitrage that is going to allow the economy to grow, ”said the IMF official.

Responding to a question on the stimulus package, Ms. Brooks essentially underscored the need for targeted support for households and that firms that are most affected are the most efficient and sensible way to provide support.