(Bloomberg) -- The International Monetary Fund's forecast for India's economy swung from expansion to contraction, marking the sharpest downgrade in projections of the world's main economies.
The Washington-based lender now sees India's gross domestic product declining 4.5% in the fiscal year through March 2021, compared with an April projection of 1.9% growth. The 6.4 percentage-point downgrade in the forecast is due to “a longer period of lockdown and slower recovery than anticipated in April,” the IMF said in an update of its World Economic Outlook report, released Wednesday in Washington.
India imposed one of the world's biggest and strictest stay-at-home rules from the end of March to curb the coronavirus pandemic, easing some of the restrictions recently even though infections continue to surge.
The IMF's projection for India's first full-year contraction in more than four decade is still milder than those of some analysts. Goldman Sachs Group Inc. is forecasting a 5% decline this year, while Bloomberg Economics' Abhishek Gupta is projecting a 10.6% plunge. The Asian Development Bank also earlier this month downgraded its growth outlook for India, estimating a 4% contraction compared with an expansion previously.
The IMF forecasts the $2.7 trillion economy will recover next year, growing at 6% -- lower than April's forecast of 7.4% expansion.
Weaker growth will also weigh on the government's budget. The IMF is forecasting the combined fiscal shortfall of the federal government and states will reach 12.1% of GDP in the year through March 2021, up from 7.9% in the previous financial year. Overall debt is projected to rocket to 84% of GDP and then rise further to 85.7% next year.
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