IMF's Chief Economist, Gita Gopinath speaks to NDTV on downgrading India's growth projection to 9.5 per cent from 12.5 per cent for fiscal 2021-22 - down by three percentage points, following the severe second wave of COVID-19 pandemic in the country. For the current fiscal year, India witnessed the largest drop in growth projections made by IMF, even as the global economic growth rate remains the same at six per cent, according to IMF's latest World Economic Outlook (WEO).
Here are the Highlights of the conversation:
- If there is another Covid wave that limits mobility, it risks another downgrade.
- The second wave in India was really catastrophic, unlike what we have seen in the other parts of the world and it did hit India very hard.
- We have been warning about divergence. In advance economies we have the number at 40% of their population, so there's a big divide.
- India also has one of the largest population, so it's difficult to have it (vaccine) done in 2 months, so 30% of the population will be vaccinated by the end of this year by this rate.
- The problem is where the doses are going. We have seen the most of it is going to advanced economies, those who have vaccinated 75 per cent of their population. So, we have decided to donate 1 billion to Covax, that way there will be fair distribution.
- 5000 million doses this year (globally) is a good place to start. Hoping to get 500 million doses more. Part of the problem is that countries have no visibility as they don't know when they are going to get the doses. It is difficult to prepare health care infrastructure. We are trying to have a task force to see what the gaps are.
- Fiscal support is another reason for the divide. In India, the focus should be below the line. But this is a changing picture. When the second wave happened, they did the free food programme, now they have procured 75 per cent of vaccination but more can be done in the revenue expenditure side, helping MSMEs etc.
- This pandemic has been very very hard on lots of the people. We are looking close to 30 million poverty who are living in poverty. So, support needs to be provided.
- Cash transfers are not helicopter money, they are giving cash to households, it's on how governments can do that. It's the central bank directly helping. It has risks attached to it. It's different from borrowing money.
- Given what we are seeing in terms of inflation numbers in India, we are seeing some countries print money but that is done at a very slow pace. But printing money won't help in India's situation. It will need a credible plan.