India's economy is hurtling down with the IMF now projecting FY21 GDP growth to contract by 4.5 per cent.
According to IMF's chief economist Gita Gopinath, India's sharp downward revision was due to the rising number of COVID-19 infections and the impact of the lockdown.
Such a revision of Gopinath's own April estimate of 1.9 per cent growth offers a withering assessment of the economic slowdown which has now been prolonged by this lockdown and slower recovery.
But the IMF's latest World Economic Report estimates, in its own words, are inscrutable due to a higher-than-usual degree of uncertainty, which is to say that the actual growth decline could be fiercer than all forecasts.
Global growth too is projected to shrink 4.9 per cent in 2020 as against its previous estimate of 3 per cent.
But the startling news is not so much about the extraordinary collapse in growth, but it's the recovery, the direction of which the multi-lateral agency has no hold on.
If forced lockdowns choked economies' lungs, an uncertain recovery has left countries gasping for breath, literally landing them at the death's door. Here, two things await us -- a faster recovery and a potential second wave of infections. As such, the world's fortunes and individuals' fate depends on which one reaches us first and survives longer than the other.
Just until three months ago, India was one of the only two emerging economies with a potential to turn in positive growth. Now, that job is left to one country, which unsurprisingly, is China.
Having reopened it's economy in April, it's expected to punch in positive growth of 1 per cent this fiscal and 8.2 per cent next.
In 2020, barring China, all other countries, for the first time, will witness negative growth, as per IMF.
India too will recover to 6 per cent in FY21, well below its potential, while global growth will touch 5.4 per cent, barely exceeding the 2019 level. Overall, this would leave 2021 GDP some 6.5 per cent lower than in the pre-COVID-19 projections of January 2020.
Consumption and services output have dropped markedly, while the global labour market is taking a catastrophic hit.
According to the International Labour Organization, Q1 saw a loss of 130 million full-time jobs and it's likely to swell over 300 million in Q2.
Meanwhile, IMF estimates countries have committed $10 trillion (excluding monetary measures) and so global public debt is expected to reach an all-time high, exceeding 101 per cent of GDP in 2020–21.
As for income inequality, IMF projections imply a particularly acute negative impact on economies. The fraction of the world’s population living in extreme poverty — on less than Rs 144 a day — fell below 10 per cent in recent years from over 35 per cent in 1990. Now, this is at risk as most emerging and developing economies are likely to witness negative per capita income growth in 2020.
Countries with highest GDP contraction (in percentages)
Spain: 12.8
Italy: 12.8
France: 12.5
Mexico: 10.5
UK: 10.2
Canada: 8.4
US: 8
Germany: 7.8