The International Monetary Fund (IMF) on Tuesday slashed India’s growth forecast to 8.2% from 9% estimated earlier for 2022-23 citing the impact of Russia-Ukraine war on domestic consumption and private investment.
It has projected India’s growth to slow to 6.9% in 2023-24 from 7.2% estimated earlier.
The IMF cut its global growth outlook for calendar year 2022 to 3.6 per cent from 4.4 per cent, it added that the Russia-Ukraine war would “severely set back the global recovery," slow down growth and increase inflation even further.
It recommended monetary tightening by central banks to keep inflationary expectations in check amid global supply side disruption.
It also expected India’s FY23 current account deficit to be 3.1 per cent, compared with 1.5 per cent expected for FY22.
There was also a cut in India’s FY24 GDP growth forecast, to 6.9 per cent from 7.1 per cent estimated in IMF’s January report.
"Notable downgrades to the 2022 forecast include Japan (0.9 percentage point) and India (0.8 percentage point), reflecting in part weaker domestic demand - as higher oil prices are expected to weigh on private consumption and investment - and a drag from lower net exports," the IMF said in its World Economic Report, released on April 19.
China, which registered a growth rate of 8.1 per cent in 2021, has been projected to grow at 4.4 per cent in 2022 and by 5.1 per cent in 2023. The US has been estimated to grow at 3.7 per cent in 2022 against 5.7 per cent in 2021. Its projection for 2023 has been downgraded to 2.3 per cent, according to the IMF report.
Observing that both Russia and Ukraine are projected to experience large GDP contractions in 2022, it said the severe collapse in Ukraine is a direct result of the invasion, destruction of infrastructure, and exodus of its people.
In Russia, the sharp decline reflects the impact of the sanctions with a severing of trade ties, greatly impaired domestic financial intermediation, and loss of confidence. “The economic effects of the war are spreading far and wide -- like seismic waves that emanate from the epicentre of an earthquake -- mainly through commodity markets, trade, and financial linkages,” the report said.
Observing that the overall risks to economic prospects have risen sharply and policy trade-offs have become even more challenging, the IMF said.
(With Agency Inputs)