NEW DELHI: The IMF has cut India’s growth forecast for 2022 down by 80 bps to 7.4%, reflecting less favourable external conditions and more rapid monetary policy tightening. In April, the multilateral agency had estimated India’s GDP to grow at 8.2%.
For 2023 as well, it had revised the growth estimate downward by 80 basis points to 6.1%. In its latest World Economic Outlook (WEO) released on Tuesday, the agency ruled out the possibility of a global recession this year but warned that the risk of a recession was prominent next year.
“The risk of recession is particularly prominent in 2023, when in several economies growth is expected to bottom out, household savings accumulated during the pandemic will have declined, and even small shocks could cause economies to stall,” it noted.
Considering the unending economic uncertainties, it has cut global growth to 3.2% and 2.9% in 2022 and 2023, respectively 0.4% and 0.7% lower than its April estimates. In 2021, growth stood at 6.1%. The primary culprits driving revisions include the world’s leading economies the US, China, the euro area and of course India which are witnessing sharper slowdowns due to extended lockdowns in China (affecting trade), tightening financial conditions, steeper interest rate hikes, persistent inflation, and spillovers from the Ukraine war.
As for price rise, the IMF made no bones about the fact that inflation is here to stay. Its baseline projections for global inflation are pessimistic, having been revised to 8.3% in 2022 from 6.9% projected in April. While emerging market and developing economies' inflation may reach 10%, the revision is larger for advanced economies at 6.3% from 4.8%. This is due to significant price rises in major economies like the UK (2.7% upward revision to 10.5%) and the euro area (2.9% upward revision to 7.3%).