Whichever way you look at projections from various agencies, India is expected to come out of the COVID-19 pandemic worse placed than not only its peer countries, but also some of its neighbours.
The International Monetary Fund, in its World Economic Outlook report late on October 13, said that Bangladesh is set to beat India in terms of per capita gross domestic product (GDP) in calendar year 2020.
The report said that Bangladesh’s per capita GDP in dollar terms is expected to grow 4 percent in 2020 to $1,888. India’s per capita GDP, on the other hand, is expected to decline 10.5 percent to $1,877 – the lowest in the last four years, thanks to the economy flat-lining due to a increase in COVID-19 cases as well as the strictest lockdown anywhere in the world from April-June.
This would make India the third poorest country in South Asia, with only Pakistan and Nepal reporting lower per capita GDP. Notably, Bangladesh, Bhutan, Sri Lanka, and Maldives would be ahead of India.
The WEO database suggests that the Indian economy will be the worst hit from the pandemic in South Asia after Sri Lanka, whose per capita GDP is expected to shrink 4 percent in the current calendar year. In comparison, Nepal and Bhutan are expected to grow their economies this year, while the IMF has not divulged Pakistan’s data for 2020 and beyond.
Read our report on IMF's numbers: India GDP: IMF projects 10.3% contraction in FY21, sharp rebound in FY22
Overall, the IMF World Economic Outlook sharply revised its earlier projection of India’s GDP contraction. It now sees the Indian economy contracting by 10.3 percent from 4.5 percent. The report, however, added that the country’s economy might rebound with an 8.8 percent growth rate in 2021-22, higher than the 6 percent it forecast earlier.
The IMF’s forecast comes days after the Reserve Bank of India projected the economy to contract by 9.5 percent. It was the first such forecast by any government agency, as the Finance Ministry so far has not come out with revised GDP projections in light of the pandemic.
Chief Economic Advisor Krishnamurthy Subramanian has since said told CNBC TV-18 that the centre’s own projections are "a few basis points here and there" from the RBI’s projections.
The Centre, on its part, has been pointing at signs of recovery through some of the high-frequency indicators that it is tracking. Indeed, vehicle sales, rail freight and GST data collection in September were higher than the same period last year, indicating ‘green shoots’ in certain sectors of the economy.
The IMF’s projections are in line with most other economists and analysts who expected India’s economy to contract in double digits during FY21. The World Bank recently projected that the Indian economy would contract by 9.6 percent, upping the scale of contraction from 3.2 percent.
The IMF sees the global recovery at an uneven pace, with the advanced world now expected to contract less and developing countries, including India, at a higher rate. The global economy was projected to de-grow by 4.4 percent in 2020, as against 5.2 percent earlier.
For calendar year 2021, the IMF predicts a sharp economic recovery in India, which is likely to push per capita GDP ahead of Bangladesh in 2021 by a small margin.
Till five years ago, India’s per capita GDP was nearly 40 per cent higher than Bangladesh’s. In the last five years, Bangladesh’s per capita GDP has grown at a compound annual growth rate of 9.1 per cent, against 3.2 per cent growth reported by India during the period.
This has allowed Bangladesh to close the economy gap with its giant neighbour. According to economists, Bangladesh’s economic growth has been underpinned by its fast-growing export sector and a steady rise in rate of savings and investment in the country. In contrast, India’s exports have stagnated in recent years, while savings and investment have declined.