WASHINGTON: India's economy is doing fairly well, but additional monetary tightening is required, Pierre-Olivier Gourinchas, Chief Economist of the IMF said on Tuesday, as the global lender trimmed its projection of the country's economic growth in 2022 to 6.8 per cent.
In its annual World Economic Outlook report, the International Monetary Fund 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.
India had grown at 8.7 per cent in the 2021-22 fiscal (April 2021 to March 2022).
"India has been doing very well in 2022 and is expected to grow fairly robustly in 2023. We expect a growth rate at 6.8 per cent for this year, and the projection for the country is 6.1 per cent for the next year," Gourinchas told reporters at a news conference here to release the World Economic Outlook report.
It's a downward revision this year, and it's mostly due to the external outlook as well as tighter financial conditions, and the growth revision for the first quarter of the fiscal year came in weaker than previously expected, he said.
"Inflation is still above the central bank target in India. We expect India's inflation at 6. 9 per cent in 2022-23, which is likely to come down to 5.1 per cent next year. So, the overall stance of the policy we think that fiscal and monetary policy should be probably on the tightening side," Gourinchas said.
Daniel Leigh, Division Chief of the IMF's Research Department said he expects inflation will be back towards the four per cent mark in 2023-2024.
"Additional monetary tightening is going to ensure that happens," he said.
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.