How the Covid-19 pandemic has hit GDP growth
The International Monetary Fund (IMF) released its World Economic Outlook (WEO) report on Tuesday. The previous WEO was released in April this year, when the extent of the Covid-19 pandemic and ts economic implications were still being evaluated. The report gives the economic forecast on a host of indicators up to 2025. While these numbers are subject to revision even in the short-term horizon, it is worth comparing India’s post-pandemic economic trajectory with that of other South Asian countries -- Afghanistan, Bangladesh, Bhutan, and Pakistan -- and with China, the only emerging market economy that is bigger than India.
India’s post-Covid losses the biggest in South Asia
India’s GDP will contract by 10.3% this fiscal year, IMF has projected. This is the biggest contraction among the countries which have been selected here. Three other countries, Afghanistan (5%), Pakistan (0.4%) and Sri Lanka (4.6%) will also experience a contraction in GDP this year. India will only be the second country apart from Afghanistan, which will not be able to regain its 2019 GDP level even in 2021.
Investment to suffer a sharp fall
Investment as a share of GDP had been falling in India even before the pandemic. This number had come down from 39.6% in 2011 to 29.7% in 2019. It is expected to fall to 27.8% in 2020 and will not cross the 31.7% level of 2018 until 2025. To be sure, all countries except Bhutan, China and Myanmar will experience a fall in investment-GDP ratios in 2020.
Per capita GDP
While India’s per capita GDP (in current dollars) will fall below Bangladesh’s in 2020-21, it will overtake it marginally once again in 2021-22. India’s per capita GDP is significantly less than that of Bhutan and Sri Lanka in the South Asia region. With a dip in India’s per capita GDP trajectory, Bangladesh will enjoy almost similar per capita GDP levels as India’s up to 2025.