The International Monetary Fund on Wednesday projected India’s GDP growth to fall at a ‘historic low’ as it estimated it to contract by 4.5 per cent in the financial year of 2021 due to the coronavirus pandemic lockdown.

IMF’s Chief Economist Gita Gopinath said, “We are projecting a sharp contraction in 2020 of – 4.5 per cent. Given the unprecedented nature of this crisis, as is the case for almost all countries, this projected contraction is a historic low.”

“India’s economy is projected to contract by 4.5 per cent following a longer period of lockdown and slower recovery than anticipated in April,” the IMF said.

In a blog post, Gopinath said, “the COVID-19 pandemic pushed economies into a Great Lockdown, which helped contain the virus and save lives, but also triggered the worst recession since the Great Depression.”

The IMF updated its April World Economic Outlook forecast to project more worrying contraction in global GDP. “We are now projecting a deeper recession in 2020 and a slower recovery in 2021. Global output is projected to decline by 4.9 percent in 2020, 1.9 percentage points below our April forecast, followed by a partial recovery, with growth at 5.4 percent in 2021.”

IMF chief said, “These projections imply a cumulative loss to the global economy over two years (2020–21) of over $12 trillion from this crisis.”

However, the IMF also warned of uncertainties in the projections, “On the upside, better news on vaccines and treatments, and additional policy support can lead to a quicker resumption of economic activity. On the downside, further waves of infections can reverse increased mobility and spending, and rapidly tighten financial conditions, triggering debt distress. Geopolitical and trade tensions could damage fragile global relationships at a time when trade is projected to collapse by around 12 percent.”

Although reopening economy remains a primary concern the IMF has said that countries’ priority should be to manage health risks even as they reopen.

“This requires continuing to build health capacity, widespread testing, tracing, isolation, and practicing safe distancing (and wearing masks). These measures help contain the spread of the virus, reassure the public that new outbreaks can be dealt with in an orderly fashion, and minimize economic disruptions.”

Gopinath in her blog urged the the international community to further expand their financial assistance and expertise to countries with limited health care capacity. “More needs to be done to ensure adequate and affordable production and distribution of vaccines and treatments when they become available.”

The IMF said, in countries where activities are being severely constrained by the health crisis, people directly impacted should receive income support through unemployment insurance, wage subsidies, and cash transfers, and impacted firms should be supported via tax deferrals, loans, credit guarantees, and grants. To more effectively reach the unemployed in countries with large informal sectors, digital payments will need to be scaled up and complemented with in-kind support for food, medicine, and other household staples channeled through local governments and community organizations.