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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”.
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The IMF has projected India’s economic growth at 9.5 percent in FY2021-22 and 8.5 percent in 2022-23. Headline inflation is projected at 5.6 percent 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 favorable 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.