India still recovering from FY21's deep recession; many gaps yet to be filled: Gita Gopinath

International Monetary Fund Chief Economist Gita Gopinath, in an interview with India Today TV, has said India is doing well in terms of vaccination but rising unemployment and falling labour force participation numbers could be an issue. The IMF on Tuesday downgraded India's 2021-22 GDP forecast to 9.5 per cent from 12.5 per cent predicted earlier. The slashing of GDP projection by record three percentage points comes on the back of India being hit hard by the second Covid-19 wave.

Also read: IMF downgrades India's growth projection to 9.5 per cent for current FY

Here are some highlights of her interview with India Today TV:

• IMF did its projections earlier in April, I had just warned that there could be a downward risk to the forecast because the second wave was just starting and governments had started imposing localised lockdowns. That's the reason we have a downgrade of 3 percentage points this time.
• We are living in incredibly uncertain times, and there is a lot of uncertainty. India had a deep recession last year, which tells you the kind of gap still needs to be filled. So for example, India is still 8-10 percentage points below where we would have projected it to be in the absence of a pandemic.
• We had a 12.5 per cent GDP growth projection in April and we are down to 9.5. I think some people thought these numbers would come down to 2-3 percentage. So yes, there are adjustments that are being made and there is tremendous uncertainty. In terms of ballpark estimates, these are good guiding numbers.
• The recovery we have right now comes after a very deep recession. A negative 7.3 per cent contraction in FY21 and then there's a return to some kind of normalcy. But, there is still a big gap as to where India should be in the absence of the pandemic. The unemployment rate has gone up and labour force participation has come down significantly. Those are the gaps that remain to be filled.
• Vaccination is a very important factor behind the divide in the IMF growth projections where some countries are coming back strongly but some falling behind. We have advanced economies where an average of 40 per cent population is fully vaccinated. That number is 11 per cent in emerging markets and even lower in low-income countries.
• It's a good sign for India that vaccination numbers have gone up and if that pace is maintained, that's the area where a lot more can be done.
• The three things that India must do right now are additional support to low-income households, more spending on the healthcare sector and education, and communicating its medium-term fiscal strategy.

Also read: India's GDP to grow in double digits in Q1: ICRA

Also read: No reason to revise GDP growth projection downwards: RBI Governor Shaktikanta Das

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