Describing the Indian government's response to the COVID-19 situation as "swift and substantial", the International Monetary Fund (IMF) has said the country continued with labour reforms and privatisation despite the pandemic.
The IMF in its report based on "consultations" among members, however, sounded a note of caution saying that the economic outlook remains "clouded" due to pandemic-related uncertainties, contributing to both downside and upside risks.
In its "Article IV" consultations report, it further said that a persistent negative impact of COVID-19 on investment and other growth drivers could prolong the economic recovery.
On the Indian government's handling of the pandemic, the multilateral agency said it was "swift and substantial...has included fiscal support, including scaled-up support to vulnerable groups, monetary policy easing, liquidity provision, and accommodative financial sector and regulatory policies". "Despite the pandemic, the authorities have continued to introduce structural reforms, including labour reforms and a privatisation plan," the report said.
The IMF has projected India's economic growth at 9.5 per cent in FY2021-22 and 8.5 per cent in 2022-23. Headline inflation is projected at 5.6 per cent in 2021-22, amid elevated price pressures. "The economic outlook remains clouded due to pandemic-related uncertainties contributing to both downside and upside risks.
A persistent negative impact of COVID-19 on investment, human capital, and other growth drivers could prolong the recovery and impact medium-term growth," the IMF said. It further said that while India benefits from favourable demographics, disruption to access to education and training due to the pandemic could weigh on improvements in human capital.
At the same time, the recovery could also be faster than expected, it said adding that faster vaccination and better therapeutics could help contain the spread and limit the impact of the pandemic. In addition, successful implementation of the announced wide-ranging structural reforms could increase India's growth potential, the IMF noted. Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year.