International Monetary Fund (IMF) chief economist Gita Gopinath has said the global financial body's projection of 11.5 per cent GDP growth for India by the fiscal year 2021-2022 will be "mechanical". She also warned that it'll be damaging for India to tighten policy support amid coronavirus pandemic and instead stressed on reducing "wasteful expenditure" in Budget.
With the Modi government presenting its third budget of the second term in two days, Gopinath suggested the government should carry on cash support to poor people in this financial year as well. She said the Centre should focus on expanding employment guarantee scheme MGNREGA (Mahatma Gandhi National
Rural Employment Guarantee Act) and also spend more on infrastructural projects.
"The 11.5% number comes from the fact that you're coming off what we estimated as an 8% collapse the previous year. So, a lot of it is pretty mechanical," Gopinath said during the 9th CD Deshmukh Lecture.
In its latest global growth forecast released on Tuesday, the IMF has raised India's growth estimate for FY22 from 8.8 per cent to 11.5 per cent in 2021, making it the only major economy expected to register a double-digit growth amidst the COVID-19 pandemic.
Gopinath said growth in terms of year-on-year is going to be higher even if no growth happens sequentially.
Covid-19 had struck the economy hard, and April-June quarter GDP plunged to a historic low of 23.9 per cent. This was followed by some recovery on the economic front, as the GDP shrunk by 7.5 per cent in the July-September quarter. The NSO (National Statistical Office) estimates suggest the GDP will shrink at 7.7 per cent in the full fiscal year.
Gopinath said India had faced output loss due to coronavirus pandemic but hoped that the country would do well in the next fiscal. She said the government should focus more on providing direct support to farmers, poor households and MSMEs.
Gopinath also suggested the Centre should make efforts to reduce wasteful expenditure, devise concrete divestment plan and make the GST system more efficient. "There is lots of wasteful expenditure done in the Budget," she said.
India is doing an ambitious vaccination drive, Gopinath said, adding MNREGA will be useful this year also as the pandemic has hit women more than men.
India had announced Rs 20 lakh crore Atma Nirbhar Bharat package to provide relief to the Covid-hit economy. The stimulus package, spread over five announcements, included Rs 12.71 lakh crore of liquidity boosting measures by the Reserve Bank of India (RBI).
Meanwhile, in its latest World Economic Outlook Update, the IMF said it expects the Indian economy to have contracted by 8 per cent in 2020, leaving China to be the only major economy to have registered a positive growth during the year (2.3 per cent). While IMF has pegged India's growth at 6.8 per cent in 2022-23, the same for China is at 5.6 per cent.
Also read: Budget 2021