Virendra Pandit
Mumbai: The International Monetary Fund (IMF) has revised its growth forecast for the Indian economy sharply higher to 11.5 percent for 2021-22 and 6.8 percent for FY23, making it the only country projected to register double-digit growth, after a minus 8 percent growth rate in 2020 due to the COVID-19 triggered nationwide lockdown for months.
In its latest World Economic Outlook update, the IMF said while vaccine approvals are good news for a turnaround from the pandemic, concerns still linger owing to new strains that have emerged in different parts of the world, according to media reports on Thursday.
The IMF projects that the global economy will grow at 5.5 percent in 2021 and 4.2 percent in 2022. For 2020, though, the global growth contraction is estimated at negative 3.5 percent, 0.9 percentage points higher than the previous forecast.
“What has kind of worked well for India is that when the economy opened up after the stringent lockdowns, you saw activity recovering much faster than expected. Mobility has returned much more quickly. While in other economies when you reopened, you then had a second and third strong wave of the pandemic, that has not happened in India,” IMF’s Chief Economist Gita Gopinath said.
She said that India has actually seen a sharp decline in the number of active cases, which may be a reflection of the fact that there were many more in India who were infected but were asymptomatic and therefore have the anti-bodies. “So that is a very important piece of this revision too,” she added.
Gopinath said that the Insolvency and Bankruptcy Code (IBC) should now be given priority since bad loans are expected to rise in the wake of the economic disruption caused by the pandemic.
She also said the idea of a ‘bad bank’ was reasonable.
In an interview with a TV news channel she said, a more efficient IBC process is required when India could see the NPAs going up to 13 percent in the baseline. “The bad bank is certainly a reasonable idea but right now I would encourage the banks and the NBFCs to raise capital given how easy the financial conditions are at this point. The government should also infuse capital into the public sector banks.”
The idea of a ‘bad bank’ has been supported by experts ahead as an aggregator of all stressed assets in the system and work towards the resolution of these assets whereas banks can focus on their business.
