IMF Slashes India's GDP Forecast To 6.8%, As Global Woes Remain

The International Monetary Fund (IMF) cut its projection of India's economic growth in 2022 to 6.8 per cent. This follows a cut by leading global rating agencies, which have trimmed GDP forecasts. Earlier, last week, World Bank downgraded India's GDP or gross domestic product to 6.5% for the fiscal year 2022-23 from an earlier estimate of 7.5%. In the previous year, the Indian economy grew by 8.7%.

IMF had in July projected a gross domestic product (GDP) growth of 7.4 per cent for India in the fiscal year that started in April 2022. Even that forecast was lower than 8.2 per cent projected in January this year. India had grown at 8.7 per cent in 2021-22 fiscal (April 2021 to March 2022).

In its annual World Economic Outlook report released on Tuesday, the IMF said outlook for India is growth of 6.8 per cent in 2022 -- a 0.6 percentage point downgrade 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 per cent in 2021 to 3.2 per cent in 2022 and 2.7 per cent 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 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, Economic Counsellor and the Director of Research of the IMF, in his forward to the WEO released during the annual meeting of the IMF and the World Bank.

With the Reserve Bank of India set to further hike interest rates, we might see growth slowing, as demand for goods and services eases.

With inputs from pti