What could be the implications of the IMF lowering India’s GDP growth targets for 2020?

International Monetary Fund lowered its estimate for GDP growth for India for calendar year 2020. It projected India’s GDP to contract by 4.5% in calendar year 2020 due the severe lag effect of COVID-19. IMF averred that while Unlock 1.0 has been applied to business establishments across most non-containment zones, the lag effect in terms of raw materials and labour availability would still be significant.

Originally, IMF had projected positive 1.9% growth in GDP for calendar 2020. This marks a 590 bps downgrade in growth by the IMF. Globally, IMF has projected that global output to shrink by 4.9% and emerging markets output to contract by 3%. The impact on India is expected to be much larger due to more afflictions as well as the stringent lockdown measures applied by the government on business establishments.