The growth numbers for the next financial year may have implications for the Budget, which will be tabled in Parliament in less than a week. The Budget assumes economic growth at current prices which has an inflation component in it. If it also projects the economy to grow by 11.5 per cent and assumes the inflation rate (called deflator in the GDP methodology) of 3.5 per cent (which was projected by the advance estimates for 2020-21), GDP growth would be 15 per cent for the next financial year. Then all the important numbers such as tax collection,
and revenue deficit would be calculated from this. The 15 per cent growth would mean robust tax collection, albeit the
still remains high as the government might go for high capex to revive the economy. Expenditure on health may also add to the expenditure side.
Spain, the UK, Italy, and France were projected by the IMF to witness a sharper contraction in the economy than India's.
The IMF projected the global growth contraction for 2020 at 3.5 per cent, 0.9 percentage point less than projected in the previous forecast, reflecting stronger-than-expected momentum in the second half of 2020.
It said although recent vaccine approvals had raised hopes of a turnaround in the pandemic later this calendar year, renewed waves and new variants of the virus posed concerns for the outlook. Amid exceptional uncertainty, the global economy is projected to grow 5.5 per cent in 2021 and 4.2 per cent in 2022. The 2021 forecast is revised up 0.3 percentage points relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies.
"The projected growth recovery this year follows a severe collapse in 2020 that has had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors," it said.
The projection for the global growth could be raised if further favourable news
on vaccine manufacture (including on those under development in emerging market economies), distribution, and effectiveness of therapies could increase expectations of a faster end to the pandemic than assumed in the baseline, boosting confidence among firms and households, it said.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.