New Delhi: The International Monetary Fund (IMF) cut its projection of India’s economic growth for the current fiscal (FY23) by 0.6 percentage points to 6.8% as it joins other agencies that have trimmed forecasts while also warning that the worst is yet to come for the global economy.
The IMF had in July projected a gross domestic product (GDP) growth of 7.4% for India in the fiscal year that started in April 2022. Even that forecast was lower than the 8.2% it projected in January this year.
India had grown at 8.7% in the 2021-22 fiscal year (April 2021 to March 2022), mainly due to a low base effect caused by the COVID-19 lockdown of the 2020-21 fiscal year.
In its annual World Economic Outlook (WEO) report released on Tuesday, the IMF said the outlook for India is growth of 6.8% in 2022 – a downgrade by 0.6 percentage points since the July forecast, reflecting a weaker-than-expected outturn in the second quarter and more subdued external demand.
Global growth is forecast to slow from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is the weakest growth profile since 2001, except for the global financial crisis and the acute phase of the COVID-19 pandemic.
The World Bank earlier this month trimmed India’s growth forecast by a full percentage point, trimming it from 7.5% to 6.5%. The Reserve Bank of India in late September cut its growth forecast to 7% from an earlier estimate of 7.2% after raising the benchmark repo rate by 50 basis points to 5.9% as to contain high inflation – seen to remain above 6% until early 2023.
The economic growth projections reflect significant slowdowns for the largest economies: a US GDP contraction in the first half of 2022, a euro area contraction in the second half of 2022, and prolonged COVID-19 outbreaks and lockdowns in China with a growing property sector crisis, the IMF said.
“The global economy continues to face steep challenges, shaped by the lingering effects of three powerful forces: the Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China,” said Pierre-Olivier Gourinchas, director of research at IMF, in his forward to the WEO released during the annual meeting of the IMF and the World Bank. The Wire
