IMF’s Projections and Warnings for India’s Economy (2023)
IMF’s Projections and Warnings for India’s Economy (2023):
GDP Growth and Debt Sustainability:
- IMF projects India’s GDP growth at 6.8% for the ongoing fiscal year.
- India’s debt-to-GDP ratio, which was 83.4% in FY22, is expected to remain at this level before gradually declining from FY26.
- Debt sustainability risks have increased due to higher effective interest rates, high gross financing needs, and slowing growth.
Growth and Inflation Projections:
- India’s GDP growth is expected to moderate in the next fiscal year, projecting at 6.1%.
- Inflation for the current fiscal year is forecasted at 6.9%, gradually moderating to 5.1% in the next year.
Current Account Deficit (CAD) and Fiscal Deficit:
- CAD is expected to rise to 3.5% of the GDP in the current fiscal, driven by higher commodity prices and strengthened import demand.
- The central government’s fiscal deficit, targeted in the Union Budget, is within reach. A stronger tightening in the general government fiscal stance is expected for FY24.
Risks and Uncertainty:
- High uncertainty, with downside risks, especially concerning a potential global growth slowdown and spillovers from the Russia-Ukraine war.
- The IMF emphasizes the potential disruptions in global food and energy markets due to the conflict, posing a significant impact on India.
- Rising inflation domestically could dampen domestic demand and affect vulnerable groups.
Medium-Term Growth Potential and Reforms:
- Successful implementation of wide-ranging reforms could enhance India’s medium-term growth potential.
- Digitization advances could lead to greater-than-expected dividends for India’s medium-term growth.
IMF’s Policy Recommendations:
- Fiscal policy should ensure medium-term sustainability.
- Additional monetary tightening should be carefully calibrated and communicated.
- Exchange rates should act as the main shock absorber; intervention should be limited to addressing disorderly market conditions.
- Financial sector policies should facilitate the exit of non-viable firms and encourage banks to build capital buffers and recognize problem loans.
- Government guarantees should sustain credit flow to viable MSMEs, with only 2% of guaranteed loans currently non-performing.
- Further MSME guarantee scheme extension may not be warranted to contain the risk of loan evergreening.
- Improving productivity, strengthening governance, and trade liberalization are recommended for medium-term growth.
Recent RBI Actions:
- The Reserve Bank of India increased the repo rate by 35 basis points to 6.25% to address inflationary pressures.
- RBI Governor Shaktikanta Das indicated a commitment to further repo rate hikes.
Overview of IMF’s Article IV Consultation:
What is Article IV of IMF’s Articles of Agreement?
- Article IV is a provision in the International Monetary Fund’s Articles of Agreement that mandates the IMF to conduct bilateral consultations with its member countries.
Purpose of Article IV Consultation:
- The consultations aim to assess the economic and financial situation of the member country.
- Evaluate the impact of the country’s policies on its own and global economy.
Frequency of Consultations:
- Typically conducted annually, providing a regular assessment of the member country’s economic health.
2. Omicron Subvariant JN.1 Emerging as Dominant Lineage:
- Researchers at the University of Tokyo suggest that the Omicron subvariant JN.1, with the L455S “FLip” mutation in its spike protein, is likely to become the dominant lineage globally.
- JN.1, a descendant of BA.2.86, was designated a variant of interest (VOI) in December 2023.
Characteristics of JN.1 Subvariant:
- JN.1 carries the FLip mutation, increasing transmissibility.
- It evolved from BA.2.86, distinct from other Omicron lineages like EG.5.1 and HK.3.
- Studies from Peking University highlight the rapid dominance of JN.1 in France, Spain, and its potential to evade immunity.
Effectiveness Against Immunity:
- The “FLip” mutation, including L455S, impacts the receptor binding capacity of ACE2, the entry point for SARS-CoV-2.
- JN.1 displays an enhanced ability to evade immunity, posing challenges to vaccination efforts.
Global Impact and Transmission:
- The effective reproductive number (Re) of JN.1 is higher in France, the United Kingdom, and Spain, indicating increased transmissibility.
- CDC in the United States expects JN.1 to account for 39-50% of all SARS-CoV-2 variants, suggesting potential challenges in controlling its spread.
Global COVID-19 Situation:
- Global cases increased by 52%, and deaths decreased by 8% between November 20, 2023, and December 17, 2023, according to WHO.
- In the same period, India reported 3,241 new cases and 21 deaths, while the Southeast Asia Region saw a 388% increase.
Vaccination and Precautions:
- INSACOG chief NK Arora emphasizes that additional vaccine doses are not currently required, except for specific vulnerable groups.
- The Union health ministry reports 752 new infections on December 23, 2023, with a cautionary approach for the elderly and immunocompromised individuals.
CDC Advisory on JN.1:
- The CDC notes an expected increase in JN.1 prevalence, indicating potential challenges in transmissibility or immune evasion.
- JN.1’s impact on infections and hospitalizations is uncertain, necessitating continued monitoring.
EG.5 Variant Trends:
- Globally, EG.5 remains the most reported variant of interest (VOI), but it has shown declining trends in recent weeks.
Conclusion: Ongoing developments in the emergence of the JN.1 subvariant underline the dynamic nature of the COVID-19 pandemic. Vigilant monitoring, research, and global cooperation are crucial to understanding and mitigating the impact of new variants.
3. Dengue Outbreaks – WHO Analysis
Ten-Fold Increase in Dengue Cases (2000-2019):
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- WHO analysis reveals a significant surge in dengue cases from 500,000 to 5.2 million between 2000 and 2019.
- Dengue cases are likely underreported due to asymptomatic infections and non-notifiable status in many countries.
Global Dengue Situation (2023):
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- Global dengue cases spiked in 2023 after a lull between 2020-2022.
- In 2019, 80 countries reported over five million cases and 5,000 dengue-related deaths.
- The Americas were severely affected, reporting 4.1 million cases in 2023, with Brazil leading, followed by Peru and Mexico.
Dengue in Different WHO Regions:
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- Southeast Asia: Bangladesh and Thailand experienced a notable surge in dengue cases in 2023.
- Africa: Burkina Faso reported the highest number of cases (146,878) and 688 deaths.
- Eastern Mediterranean: Dengue spread to nine countries, with Pakistan, Saudi Arabia, and Oman reporting the most cases.
- Europe: Dengue established itself, with outbreaks reported in Italy, France, and Spain.
- Western Pacific: Over 500,000 cases reported in 2023, with the Philippines, Vietnam, and Fiji being the worst affected among Pacific Islands.
Factors Contributing to the Upsurge (2023):
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- Changing distribution of vectors (Aedes aegypti and Aedes albopictus).
- Climate factors, including increased temperature and altered rainfall patterns due to the El Niño climate phenomenon.
- Fragile health systems post-pandemic, political and financial instabilities, and high population movements.
Urgent Measures and Global Response:
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- WHO emphasizes the need for increased advocacy and resource mobilization.
- A Global Joint Incident Management Support Team established, involving WHO’s Health Emergencies Programme and technical expertise to manage outbreaks.
- Dengue transmission is cyclic, and large outbreaks occur every 3-4 years.
- No specific treatment for dengue, but timely diagnosis and appropriate clinical management can prevent severe cases and mortality.