Context: Recently, the International Monetary Fund (IMF)  sharply revised its projection of contraction in India’s gross domestic product (GDP) for 2020-21 – from 4.5 per cent earlier to 10.3 per cent – citing the rise in Covid-19 cases.

• The organisation, however, added that the country’s economy might rebound with an 8.8 per cent growth rate in 2021-22, higher than the 6 per cent it forecast earlier.

Key findings

• The IMF in its latest World Economic Outlook, titled A Long and Difficult Ascent, projected that only the Chinese economy would grow. 
• China is expected to grow by 1.9 per cent this year, faster than the earlier forecast of 1 per cent.
• It expected the world economy to fall less severely, by 4.4 per cent as against 5.2 per cent it projected earlier, in 2020.
• The projections are in line with most other economists and analysts who expected India’s economy to contract in double digits during FY21. 
• The World Bank recently projected that the Indian economy would contract by 9.6 per cent, upping the scale of contraction from 3.2 per cent.
• China and India, as large and fast-growing emerging market economies, were significant emitters and were expected to continue to account for growing shares of carbon emissions.
• By contrast, the five largest countries/economic union — the United States, China, the European Union, Japan, and India — acting jointly could make a large dent in global emissions.

Signs of recovery are also uneven across the world

• For instance, business surveys of purchasing managers show firms in the United States, euro area, China, and Brazil expanded output successively in July and August compared with the previous month, 
• Whereas the opposite was true for India, Japan, and Korea. For September, these indicators point to stronger activity in manufacturing but some setbacks for services, most likely reflecting the increase in infections
• Inflation in emerging market and developing economies inflation declined sharply in the initial stages of the pandemic, although it has since picked up in some countries such as India, reflecting supply disruptions and a rise in food prices. 
• India’s retail inflation rose to an eight-month high of 7.34 per cent in September, pushed up by the double-digit food inflation. 
• This was the sixth month in a row that the inflation rate remained above the RBI’s comfort zone of above 6 per cent.
• As per IMF, India's current account balance may show a surplus of 0.3 per cent of GDP in 2020-21, a rarity in the country. It attributed this to lower oil prices and weak domestic demand.

India and its neighbour in South Asia

• Bangladesh is set to beat India in terms of per capita gross domestic product (GDP) this calendar year, thanks to a sharp contraction in the Indian economy due to Covid-19 and the economic lockdown.
• This makes India the third poorest country in South Asia, with only Pakistan and Nepal reporting lower per capita GDP, while Bangladesh, Bhutan, Sri Lanka, and Maldives would be ahead of India.
• In comparison, Nepal and Bhutan are expected to grow their economies this year, while the IMF has not divulged Pakistan’s data for 2020 and beyond.
• According to the WEO database, India’s economic contraction in 2020 will be its worst since the 1990-91 economic crisis when the per capita GDP had contracted 17.5 per cent in 1991. 
• India’s GDP per capita in dollar terms had last contracted 1 per cent year-on-year in 2012 due to currency depreciation. In all, India’s per capita GDP in dollar terms contracted on eight occasions in 40 years, five of which occurred prior to 2000.
• However, IMF predicts a sharp economic recovery in India next year, which is likely to push per capita GDP ahead of Bangladesh in 2021 by a small margin.