IMF slashes India's growth rate to 1.9% in 2020, forecasts global recession due to COVID-19
Washington: The IMF on Tuesday slashed India's projected GDP growth to 1.9 per cent in 2020 from 5.8 per cent in January, as the global economy hits the worst recession since the Great Depression in the 1930s due to the raging coronavirus pandemic that has nearly stalled all economic activities across the world.
With this subdued forecast, India is likely to record its worst growth performance since the 1991 liberalisation. But the International Monetary Fund, in its latest edition of the World Economy report, said India and China are the only two major countries, which will register a positive growth rate.
The IMF has projected a growth rate of 1.2 per cent for China in 2020 - the slowest in more than four decades.
However, the two Asian giants are likely to bounce back strongly in 2021 with India expected to grow at 7.4 per cent and China at 9.2 per cent.
"We project global growth in 2020 to fall to -3 per cent. This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period," Indian-American Gita Gopinath, the IMF Chief Economist said, adding that the COVID-19 pandemic will severely impact growth across all regions.
The Great Depression was the worst worldwide economic downturn that lasted for 10 years from 1929, beginning in the US when the New York Stock Exchange on Wall Street crashed and wiped out millions of investors.
Most countries, in the advanced economy group, are forecast to contract this year, including the US ( 5.9 per cent), Japan ( 5.2 per cent), the United Kingdom ( 6.5 per cent), Germany ( 7.0 per cent), France ( 7.2 per cent), Italy ( 9.1 per cent), and Spain ( 8.0 per cent), the IMF report said.
Even with a sharp rebound in the remainder of the year and sizable fiscal support, the Chinese economy is projected to grow at a subdued 1.2 per cent in 2020.
The IMF said several economies in the region were forecast to grow at modest rates, including India (1.9 per cent) and Indonesia (0.5 per cent), and others are forecast to experience large contractions (Thailand, 6.7 per cent).
In January, IMF projected India's growth at 5.8 per cent in 2020 and 6.5 per cent in 2021.
On Tuesday, the IMF said that other regions are projected to experience severe slowdowns or outright contractions in economic activity, including Latin America ( 5.2 per cent) with Brazil's growth forecast at 5.3 per cent and Mexico's at 6.6 per cent; emerging and developing Europe ( 5.2 per cent) with Russia's economy projected to contract by 5.5 per cent.
The Middle East and Central Asia ( 2.8 per cent) with Saudi Arabia's growth forecast at 2.3 per cent, with non-oil GDP contracting by four per cent, and most economies, including Iran, expected to contract; and sub-Saharan Africa ( 1.6 per cent) with growth in Nigeria and South Africa expected at 3.4 per cent and 5.8 per cent respectively.
This is a crisis like no other, and there is substantial uncertainty about its impact on people's lives and livelihoods, Gopinath said.
A lot depends on the epidemiology of the virus, the effectiveness of containment measures, and the development of therapeutics and vaccines, all of which are hard to predict.
In addition, many countries now face multiple crises a health crisis, a financial crisis, and a collapse in commodity prices, which interact in complex ways, she said.
Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, Gopinath said the IMF projects global growth in 2021 to rebound to 5.8 per cent.
This is a truly global crisis as no country is spared, Gopinath said.
Countries reliant on tourism, travel, hospitality, and entertainment for their growth are experiencing particularly large disruptions, she added.
The emerging markets and developing economies face additional challenges with unprecedented reversals in capital flows as global risk appetite wanes, and currency pressures, while coping with weaker health systems, and more limited fiscal space to provide support. Moreover, several economies entered this crisis in a vulnerable state with sluggish growth and high debt levels, the IMF chief economist wrote.
According to the World Economic Report, the rebound in 2021 depends critically on the pandemic fading in the second half of 2020, allowing containment efforts to be gradually scaled back and restoring consumer and investor confidence.
Significant economic policy actions have already been taken across the world, focused on accommodating public health care requirements, while limiting the amplification to economic activity and the financial system.
The projected recovery assumes that these policy actions are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, it said.
India is likely to record its worst growth performance since the 1991 liberalisation this fiscal year as the coronavirus outbreak severely disrupts the economy, the World Bank said on Sunday.
India's economy is expected to grow 1.5 per cent to 2.8 per cent in the 2020-21 fiscal which started on April 1, the World Bank said in its South Asia Economic Focus report. It estimated India will grow 4.8 per cent to 5 per cent in the 2019-20 fiscal that ended on March 31.
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Modi-Carney talks: India, Canada seal landmark uranium deal; set USD 50 bn trade target
New Delhi (PTI): India and Canada on Monday sealed key pacts on supplies of Uranium and critical minerals and vowed to soon conclude a comprehensive economic partnership agreement, with Prime Minister Narendra Modi and his Canadian counterpart Mark Carney finalising a new framework to shore up ties including taking bilateral annual trade to USD 50 billion by 2030.
In their wide-ranging talks, the two leaders also pledged to ramp up cooperation in defence, critical technologies, small and modular nuclear reactors, education and renewable energy as Modi said the relations between the two countries are now filled with new energy, mutual trust and positivity.
Canada is set to support India's civil nuclear energy sector under the USD 2.6 billion uranium supply agreement.
The prime minister said both sides agreed that terrorism, extremism, and radicalisation are common and serious challenges not only for India and Canada but for all humanity. "Our close cooperation against these is crucial for global peace and stability," he said.
Modi and Carney also deliberated on the precarious security situation in West Asia with PM Modi asserting that India supports the resolution of all conflicts through dialogue and diplomacy.
"The current situation in West Asia is a matter of deep concern for us. India supports the resolution of all disputes through dialogue and diplomacy. We will continue to work with all countries to ensure the safety of all Indian citizens in the region," the prime minister said in his media statement.
The major outcomes of the Modi-Carney talks were their decision to expand trade relations, a move that comes amid Canada's increasingly frosty economic ties with the Trump administration.
The fresh move to bolster ties came as part of ongoing efforts by the two sides to reset the relations that came under severe strain following a diplomatic row over the killing of a Khalistani separatist in 2023.
"Our goal is to reach USD 50 billion in trade by 2030. Unlocking the full potential of economic cooperation is our priority. Therefore, we have decided to finalise the Comprehensive Economic Partnership Agreement soon.
"This will create new investment and employment opportunities in both countries," Modi said.
"Canada's pension funds have invested USD 100 billion in India. This symbolises their deep belief in India's growth story," he said.
The volume of two-way annual trade at present is around USD 13 billion.
The prime minister said the Memorandum of Understanding (MoU) on critical minerals will strengthen resilient supply chains. Canada is known for its significant reservoir of critical minerals and rare earth materials.
"In the energy sector, we are building a next-generation partnership, which will focus on hydrocarbons as well as renewable energy, green hydrogen and energy storage," Modi said.
"In civil nuclear energy, we have signed a landmark deal for long-term uranium supply. We will also work together on small modular reactors and advanced reactors," he said.
Modi said the growing cooperation between the two countries in the field of defence and security symbolises the deep mutual trust and the maturity of the relationship.
"We will work to enhance defence industries, maritime domain awareness and military exchanges. To this end, today we have decided to establish the India-Canada defence dialogue," he said.
The prime minister also highlighted the expansion of two-way ties in the education sector.
"New partnerships between several universities in AI, healthcare, agriculture and innovation are being announced. We also agreed on Canadian universities opening campuses in India," he said.
The prime minister also made a mention of how India and Canada share an "unwavering belief" in democratic values.
"We celebrate diversity. The well-being of humanity is our shared vision. This vision inspires us to move forward in every field. Today, we discussed transforming this vision into a next level partnership," he said.
In his remarks, Carney mentioned the future of India-Canada energy ties.
"Today, we are launching a strategic energy partnership with significant potential to expand bilateral energy trade. We've signed a new critical minerals partnership spanning development, processing and secure supply chains for clean energy, electric vehicles and advanced manufacturing," he said.
"We're deepening our cooperation in clean energy, expanding collaboration across wind, solar and hydrogen, because Canada has big plans as well," he said.
Carney described the uranium supply agreement as a reflection of shared commitment to clean, reliable energy.
"All of these agreements under one planet are the beginning of a new, prosperous relationship that will offer generational opportunities for workers and businesses in both their countries and which will protect the planet for future generations," he said.
Carney landed in New Delhi on Sunday after spending two days in Mumbai, where he met several industry leaders.
In the face of its tense trade ties with the Trump administration, Canada is looking at building a stronger, independent and more resilient economy.
In the last few months, India and Canada have taken several steps to normalise their relations.
India-Canada ties hit rock bottom following then-Prime Minister Justin Trudeau's allegations in 2023 of a potential Indian link to the killing of Hardeep Singh Nijjar. India dismissed Trudeau's accusation as "absurd".
In October 2024, India recalled its high commissioner and five other diplomats after Ottawa attempted to link them to the Nijjar case. India also expelled an equal number of Canadian diplomats.
However, Liberal Party leader Carney's victory in the parliamentary election in April last year helped in beginning the process to reset relations.
Subsequently, both sides have already posted their high commissioners in each other's capitals.
Last June, Modi travelled to Kananaskis, Canada, to attend the G7 summit. Modi and Carney held extensive talks on the margins of the summit with a focus on rebuilding the ties.
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