India’s economy to contract by 10.3%, says International Monetary Fund

Description

Context: The International Monetary Fund released the World Economic Outlook October 2020 report titled, “A Long and Difficult Ascent”.

Other key highlights:

With the country and world reeling under the impact of the coronavirus pandemic, the Indian economy is expected to grow at -10.3 % ( i.e., a contraction) in 2020
Global growth is projected to be -4.4% (i.e., a contraction in output of 4.4%) for this year.
India is expected to rebound in 2021 with 8.8 per cent growth.

More action required

Global fiscal support totalling some $12 trillion and measures such as rate cuts, asset purchases and liquidity injections by central banks protected lives and livelihoods and “prevented a financial catastrophe”.
There is still much needs to be done to ensure a sustained recovery, which includes
- greater international collaboration on tests, treatments and vaccines to increase in global cumulative income by $ 9 trillion by the end of 2025.
- policies should “aggressively” seek to limit persistent economic damage.
- Governments should support incomes, by well-targeted cash transfers, wage subsidies and unemployment insurance.
- For firms that are viable but vulnerable, support such as tax deferrals, debt servicing moratoria, equity-like injections.
- policies should aid workers’ transition to growing sectors (e.g. e-commerce) and away from sectors like travel which are likely to shrink.
- Other measures include support to governments via institutional grants, concession financing and debt relief “in some cases” so these governments can prioritize critical spending for health and transfers to the poor.
- Along with the necessary easing of monetary policy across the world, measures to prevent the buildup of financial risks over the medium should be pursued and “central bank independence should be safeguarded at all costs.”
- Measures and the use of digital technology to get assistance to citizens is the need of the hour.