The International Monetary Fund (IMF) supports India's "very wise" decision to impose a nationwide lockdown to combat the deadly coronavirus pandemic despite the resulting economic slowdown, according to Changyong Rhee, the organisation's director of the Asia and Pacific Department.
He said at a press conference on Wednesday, "India entered the pandemic turmoil in the midst of a credit crunch induced slowdown and its recovery prospect becomes more uncertain."
The IMF drastically revised India's rate of growth projection for the present financial year to 1.9 per cent from the 5.8 per cent made in January, which was less than the 7 per cent made in October.
Rhee said that India's strict action against the COVID-19 pandemic "can cause a drop in economic activity (and) growth rate will go down definitely, but I think that is a very wise and important decision to minimise the long-term cost of this disease spread."
He said that the fiscal stimulus and the monetary policy easing adopted by the Indian government and the Federal Reserve Bank are in the right direction, but whether or not they are going to be enough "depends on how this containment policy which is just adopted, how successful it will be".
He said that he hoped that India's efforts will be successful, "but if the situation becomes aggravated, then I think in the short run they have no choice but to use more fiscal and monetary policies to contain the slowdown of the economy".
After the COVID-19 crisis is over, he said India will need to return to completing structural reforms and take steps for a more inclusive growth by that specialize in priorities just like the infrastructure.
Surveying the Asian region, he said that for the primary time in 60 years its growth are going to be at "a standstill" - or zero per cent - this year.
But he added that even this performance is going to be "better than other regions."
Similarly, India with its paltry rate of growth projection of 1.9 per cent this year is going to be the fastest-growing major economy in the world, as per the IMF's projections.
And China with 1.2 per cent comes next.
IMF projects world economic process to travel below zero -- the economy shrinking by 3 per cent -- this year.
The economies of developed countries are projected to shrink by 6.9 per cent, the US economy by 5.9 per cent and the Euro areas by 7.5 per cent.
Rhee said, "For 2021, there is hope: if containment policies succeed, we will see a rebound in growth. However, it is highly uncertain how this year will progress."
The IMF expects India to rebound in the next financial year with a rate of growth of 7.4 per cent, more than the 6.5 per cent projected in January.
For the region as a whole, Rhee said the primary priority is to support and protect the health sector to contain the virus and introduce measures to slow contagion.
If there aren't enough fiscal resources to hold out these, countries will need to re-prioritise from other expenditures, he added.
Because the coronavirus containment measures are severely affecting economies, countries will need to provide targeted support to hardest-hit households and firms. He said.
Jobs and industries, especially small and medium size enterprises, got to be protected directly, not just through financial institutions, he said.