IMF 's World Economic Outlook

Context: Recently, the International Monetary Fund (IMF) in its World Economic Outlook (WEO) report has slashed India’s economic growth projection for FY22 to 9.5% from 12.5% estimated in April.

Key Findings

• Indian economy is expected to grow by 9.5% in 2021 and 8.5% in 2022 (larger than the 6.9% it had projected in April).
• In 2020, India’s economy witnessed an estimated contraction of 8%.
• While Global Economy Retained its global growth forecast at 6% for the year 2021, and it is expected to grow at 4.9% for the year 2022.
• In 2020, the global economy contracted by 3.3%

Key Suggestion
Tighter External Financial Conditions

• Emerging markets should prepare for possibly tighter external financial conditions by lengthening debt maturities where possible and limiting the buildup of unhedged foreign currency debt.

Avoid Premature Tightening Policies: Central banks should avoid premature tightening policies when faced with transitory inflation pressures but should be prepared to move quickly if inflation expectations show signs of de-anchoring.

Prioritize Health Spending

• Fiscal policy should continue to prioritize health spending, including on vaccine production and distribution infrastructure, personnel, and public health campaigns, to boost take-up.
• Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.