New Delhi, October 11: The International Monetary Fund (IMF) has cut India's GDP growth forecast for the current year by 60 basis points to 6.8 percent. Nevertheless, despite the slowdown, India would remain the world's fastest-growing major economy.
"The outlook for India is for 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 (April-June) and more subdued external demand," the IMF noted in its latest World Economic Outlook report.
The IMF projected 7.4 percent GDP growth for India in its July 2022 report. The IMF's latest GDP growth projection for India is lower than the Reserve Bank of India's (RBI) forecast of 7% for the fiscal year 2022-23.
Despite the slowdown, India would continue to be the fastest-growing major economy
According to the most recent IMF data, India's GDP growth would drop to 6.8 percent in 2022, down from 8.7 percent in 2021. Growth is expected to fall further in 2023, to 6.1%.
In comparison, consider China. China's GDP growth is expected to fall to 3.2% in 2022, down from 8.1% in 2021. China's growth is expected to accelerate to 4.4% in 2023, but will remain far lower than India's anticipated growth of 6.1%.
Global economic activity is slowing more broadly and sharply than expected, with inflation higher than it has been in decades. The economic forecast is dependent on the successful calibration of monetary and fiscal policies, the outcome of the Ukrainian war, and China's growth prospects.
Risks remain unusually high: monetary policy could miscalculate the appropriate stance to reduce inflation; diverging policy paths in the world's largest economies could exacerbate the US dollar's appreciation; tightening global financing may cause emerging market debt distress; and a worsening of China's property sector crisis may undermine growth, according to the IMF's latest World Economic Outlook report.
Policymakers should prioritise price stability and reduce cost-of-living pressures. According to the IMF, multilateral cooperation is still required to accelerate the green energy transition and prevent fragmentation.