The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) of January 2022 has downgraded India’s economic growth forecast to 9% for FY22 (ending on March 31, 2022) from 9.5% projected in October 2021.
- This cut is triggered by spread of COVID-19’s omicron variant affecting business activity and mobility, higher energy prices, increasing inflation and a deteriorating outlook for the world’s two biggest economies i.e. the United States (US) and China.
- IMF also projected a GDP (Gross Domestic Product) growth of India at 7.1% for FY23 (April 2022 to March 2023).
Global Growth Projections:
i.It is expected to moderate from 5.9% in 2021 to 4.4% in 2022.
ii.It is expected to slow to 3.8% in 2023.
Key Points:
i.This IMF estimate for India’s growth is lower than the Reserve Bank of India (RBI) prediction of 9.5% and India’s National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI) estimate of 9.2% in FY22.
- It is also lower than the 5% projection by S&P and 9.3% by Moody’s but more than the 8.3% projection by the World Bank (WB) and 8.4% by Fitch.
ii.As per IMF, in 2023, there will be expected improvements in credit growth, investment and consumption.
iii.The IMF slashed the growth forecast for the US, world’s largest economy to 4% for FY22 from the 5.2% it predicted in October 2021.
iv.The IMF expects the 19 European countries to collectively grow 3.9% in FY22, down from 5.2% in FY21.
v.The Indian economy has contracted by 7.3% (-7.3%) in FY21.
Inflation:
i.The IMF expects inflation to accelerate in 2022 and fade in 2023. Consumer prices are rising 3.9% in advanced economies, the highest since 1991 and up from the 2.3% the IMF forecast in October.
ii.The IMF expects inflation to slow next year to 2.1% in advanced economies and 4.7% in developing markets.
Recent Related News:
The IMF allocated a Special Drawing Rights (SDRs) 12.57 billion (equivalent to around USD 17.86 billion at the latest exchange rate) to India in August 2021. The total SDR holdings of India now stand at SDR 13.66 billion (equivalent to around USD 19.41 billion at the latest exchange rate).
About International Monetary Fund (IMF):
Establishment– 1944
Headquarters– Washington, D.C, United States (US)
Managing Director– Kristalina Georgieva
Members– 190 Countries (Including India)
