Global economy to contract by 4.4%, India's by 10.3%: IMF

In the recently released World Economic Outlook October 2020 report, International Monetary Fund (IMF) has calculated that the Indian economy would contract by 10.3 per cent against its June prediction of 5.8 per cent for the current fiscal year. This is a worse estimate than RBI's which estimated a contraction of 9.5 per cent. The report titled 'A long and difficult ascent', however, expects the economy to grow by 8.8 per cent as opposed to June when it expected a growth of 2.8 per cent.

On the global front, the economy is expected to contract by 4.4 per cent with a growth of 5.2 per cent in the coming year. Despite being the worst hit by the pandemic early in 2020, China has reported a swift comeback following control of the pandemic, with an expected growth of 1.9 per cent this year.

As per the database, the Indian economy's contraction this year will be its worst since the economic crisis of 1990-91 when GDP fell by 17.5 per cent. Bangladesh will also beat India GDP per capita in dollar terms this year with the country expecting a 4 per cent increase to 1,888 dollars, while India's will fall to 1,877 dollars. Five years ago, India's per capita GDP used to be 40 per cent higher than Bangladesh's. But since then, Bangladesh has strengthened its exports while simultaneously increasing savings and investments in the country, gradually closing the gap with India whose per capita GDP has grown at a compound annual growth rate of 3.2 percent against Bangladesh's 9.1 per cent. This would make India the poorest country in South Asia with only Pakistan and Nepal faring worse. WEO also estimates that India would be the worst hit in South Asia by the pandemic after Sri Lanka whose per capita GDP is expected to fall by 4 per cent this year.

The report notes that the world economy will not achieve the growth trajectory it had set itself pre-pandemic for 2020-25. The pandemic reversed the progress made since the 1990s in reducing poverty with 90 million people falling below the extreme poverty threshold. There have been setbacks in living standards across the globe and increasing inequality with low-income workers, women and youth being hit harder. After 2021, global growth is expected to relent at 3.5 per cent in the medium term.

These projections are made assuming that there will be widespread availability of vaccinations and better treatment in 2021.