Washington, January 25: The International Monetary Fund (IMF) has cut India’s economic growth forecast to 9% for the current fiscal year ending March 31, joining a slew of agencies that have downgraded their projections due to concerns about the impact of a spread of a new variant of the coronavirus on commercial activity and mobility. In its latest World Economic Outlook update on Tuesday, the Washington-based international financial institution, which in October last year forecast GDP growth of 9.5% for India, put the forecast for the next fiscal year 23 (April 2022 to March 2023) at 7.1 percent.
India’s economy contracted by 7.3% in the 2020-21 financial year. The IMF forecast for the current fiscal year is down 9.2% from the Central Government Statistics Office and 9.5% from the Reserve Bank of India’s estimate. Its forecast is lower than S&P’s 9.5% and Moody’s projections of 9.3%, but higher than the World Bank’s 8.3% and Fitch’s 8.4%. IMF says India’s outlook for 2023 is marked by expected improvements in credit growth and subsequently investment and consumption, building on the sector’s better-than-expected performance financial.
The IMF said global growth is expected to slow from 5.9 in 2021 to 4.4% in 2022, half a percentage point lower for 2022 than in the October WEO, largely reflecting projected declines in the two largest economies – the United States and China. A revised assumption removing the Build Back Better fiscal policy program from the baseline, an early withdrawal of monetary easing and continued supply shortages produced a 1.2 percentage point downward revision for states United, he said.
In China, pandemic-induced disruptions related to the zero-tolerance policy against COVID-19 and prolonged financial strains among real estate developers led to a deterioration of 0.8 percentage points. Global growth is expected to slow to 3.8% in 2023.
“While this is 0.2 percentage points higher than previously forecast, the upgrade largely reflects a mechanical recovery after current headwinds to growth dissipate in the second half of 2022. vaccination rates are improving around the world and therapies are becoming more effective,” the report said. In a blog post, IMF Chief Economist Gita Gopinath wrote that the continued global recovery is facing multiple challenges as the pandemic enters its third year.
The rapid spread of the Omicron variant has led to new mobility restrictions in many countries and increased labor shortages, she said. Supply disruptions are still weighing on activity and contributing to higher inflation, adding to pressures from strong demand and high food and energy prices, Gopinath wrote.
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