Chart: India’s Per Capita GDP To Rebound To Pre-Covid Levels Only By FY23
A near double-digit drop in the Indian economy in FY21 will push-back the country’s per capita GDP back below $2,000—a level often seen as an inflection point for economies. While per capita GDP will start rising once again in FY22, it will take until the year after for India to rebound fully from the losses imposed by the Covid-19 crisis.
According to projections by the IMF, India’s GDP per capita is estimated to fall to $1,876.5 in FY21, from $2,097.78 the previous year. While GDP per capita will rise to $2,030.62 in FY22, it is estimated to rise to $2,195.14 in FY23.
The IMF is forecasting a 10.3% contraction in real GDP in India this year, followed by a 8.8% growth next year. “All emerging market and developing economy regions are expected to contract this year, including notably emerging Asia, where large economies, such as India and Indonesia, continue to try to bring the pandemic under control,” the IMF said in its review, while marking down its forecast for India an estimated 4.5% contraction in June to 10.3% now.
India was already in the midst of a slowdown before the onset of the pandemic. While the country went into lockdown in April, infections have continued to rise. This has left India’s economy more vulnerable compared to some others in the region.
As a result, the hit to India’s per capita GDP will be more than peer economies. In terms of ranking, India slips below Bangladesh this year. While India will move back up above the neighboring nation in FY22, the gap with countries like Indonesia and China will only widen.
The Covid crisis will also mean that the Narendra Modi-led government’s goal of making India a $5 trillion economy by 2024 will be pushed out by another few years.
IMF values the Indian economy at $2.6 trillion in FY21, down from $2.9 trillion in the last financial year. By FY26, the Indian economy is projected to grow to a little below $4 trillion.
The hit to India’s economy has been quite hard this year, said DK Joshi, chief economist at Crisil. The permanent loss that India’s economy suffers is quite large even in comparison to other economies, he said. The push back is bound to reflect even in income per person, he added.
Malhar Nabar, division chief at the research department at IMF, said India has taken some structural measures that could aid medium-term growth. “We had progress on labour and farm bills. With those structural reforms in place as well to reinforce the cyclical support, the Indian economy would be well placed to start recovering from this horrible crisis that it is experiencing right now,” Nabar said at a press conference this week.