Finance Commission Chairman N. K. Singh said: it could go as high as 19 per cent. “Some had even said it could be 21 per cent as an extreme case and others said it could be more modest,” he added. Goldman Sachs has forecast India’s 2021 calendar year growth at 9.9 per cent and 2021-22 financial year growth at 15.7 per cent. Moody’s Global Macro Outlook for 2021-22 has forecast India’s GDP growth in 2021 calendar year at 8.6 per cent. The International Monetary Fund’s (IMF) world economic outlook says the Indian economy is projected to contract by 10.3 per cent in 2020 before rebounding by 8.8 per cent in 2021. The World Bank has projected a 9.6 per cent decline in economic growth this fiscal for India followed by 5.4 per cent positive growth in 2021-22.

The forecasts carry several risk factors. The most compelling of them are: the possible behaviour of the pandemic situation, social distancing practice and normalisation of markets. The odds against growth possibilities of Indian and global economies continue to be high. Few analysts deny that getting a clear picture of economic growth for next fiscal or beyond is difficult. The uncertainties surrounding the Covid-19 pandemic, vaccine availability, their reliability and affordability and further lockdowns and local containments remain a big concern.

There are also external risk factors that could emerge from a global growth slowdown, changes in commodity prices, swings in capital flows, inflation and global recession. A recent Morgan Stanley report said: “We estimate the economy to have recovered to the pre-pandemic level of output in 4Q CY20.” It cautioned that any resurgence in Covid-19 cases domestically or globally may lead to stricter lockdown measures and thus increased risk-aversion will potentially weigh on the growth outlook. The report underlines that uncertainty stemming from faster tightening of domestic financial conditions, higher-than-expected stressed asset creation, and slower recapitalisation of PSU banks are likely to weigh on the growth trend.

However, all agree that the worst is over for India. The economy is set to bounce back after it received the tag of being “among the worst performing in the world” during April-June (Q1). The government, the biggest consumer, is expected to play an increasing role in spending on projects which slowed down since the last quarter of 2019-20. Credit growth is turning positive. The manufacturing sector is slowly and steadily getting back on the growth track. The farm sector continues to do well. Higher manufacturing, electricity and agricultural output during Q2 (July-September) have raised hope that the country’s economic contraction for the current financial year will be less than the earlier projections by local and global rating agencies. Official data shows that the country’s economic growth slowed down well before the pandemic hit. The spread of Covid-19 sharply impacted the strength of the economy. Going by the Investors’ Macro Rating Index, Indian economy contracted the most this year among the other emerging economies such as China, Brazil, Russia, South Africa, Indonesia, South Korea, Malaysia, Taiwan and Thailand. Earlier, the IMF had predicted that India’s real GDP growth, this year, could shrink as much as 10.3 percent, the highest among the 10 emerging markets.

The Q2 performance of India’s economy has raised the hope. According to the Reserve Bank (RBI), the GDP may have contracted by 8.6 per cent for the July-September period. The high retail inflation is worrying. Inflation has eased in most of the emerging economies, except India. The average inflation rate in India during January-September, this year, has more-than-doubled. In most other emerging economies, inflation was lower than their corresponding level, last year. Inflation, fiscal deficit and bank credit have deteriorated in all the emerging economies, but the most in India.

At 7.2 per cent, India’s fiscal deficit too is quite high, though not the highest. China, Brazil and Russia have higher fiscal deficits than India. In September, Moody’s had forecast that the Indian economy would shrink by 9.6 per cent in the 2020 calendar year. However, going by the current trend, the global rating agency has scaled down the forecast to 8.9 per cent. For the 2020-21 financial year, Moody’s Investors Service has revised its GDP projection for India to a 10.6 per cent contraction compared to its earlier estimate of 11.5 per cent. “Consumer confidence in India remains relatively low amid a continued elevated number of daily new coronavirus cases, although this has come down from a peak in September,” Moody’s had said.

The Indian and global economy need to make a strong comeback in 2021 to heal from the pandemic though IMF is cautious. IMF has downgraded its forecasts for the coming year, warning of a long, slow recovery that will stoke poverty and damage growth. It sees a 5.2 per cent increase in global output next year, down from 5.4 per cent in its previous report. "The ascent out of this calamity is likely to be long, uneven, and highly uncertain," IMF chief economist Gita Gopinath has said in a blog post. Output in advanced economies, as well as emerging markets — with the exception of China — is projected to remain below 2019 levels next year, she said. Global growth is expected to slow to roughly 3.5 per cent between 2022 and 2025. The growth forecasts of India’s economy in 2021 by international agencies, under the circumstances, are quite impressive. Higher public consumption, higher domestic output and effective Covid-19 control will hold the key. (IPA Service)