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):

1. • 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):

1. • 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:

1. • 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):

1. • 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:

1. • 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.