With GDP growth of 6.8% in 2022, India will remain the fastest growing economy, according to the IMF

New Delhi, October 11: The International Monetary Fund (IMF) has lowered India’s GDP growth forecast for the current year by 60 basis points to 6.8%. However, despite the slowdown, India would maintain its position as the fastest growing major economy in the world.

In its latest report on the outlook for the world economy, the IMF noted: “The outlook for India is for growth of 6.8% in 2022, a decline of 0.6 percentage points since the July forecast. , reflecting a weaker-than-expected second quarter (April-June) outcome and softer external demand.” In its July 2022 report, the IMF pegged India’s GDP growth for 2022 at 7.4% The IMF’s latest projection for India’s GDP growth is below the 7% growth set by the Reserve Bank of India (RBI) for the financial year 2022-23.

However, despite the slowdown, India would remain the fastest growing major economy.

According to the latest IMF data, India’s GDP growth will slow to 6.8% in 2022 from 8.7% in 2021. Growth is expected to slow further to 6.1% in 2023.

Compare it with China. China’s GDP growth is expected to drop to 3.2% in 2022, from 8.1% in 2021. In 2023, China’s growth is expected to accelerate to 4.4% in 2023, but remain strong down from projected growth of 6.1% in India.

The slowdown in global economic activity is widespread and sharper than expected, with inflation higher than seen in decades. The economic outlook depends on a successful calibration of monetary and fiscal policies, the course of the war in Ukraine and growth prospects in China.

The risks remain unusually high: monetary policy could miscalculate the right position to reduce inflation; divergent political trajectories in the largest economies could exacerbate US dollar appreciation; the tightening of global financing could trigger an over-indebtedness of emerging markets; and a worsening of China’s real estate crisis could undermine growth, the IMF noted in its latest World Economic Outlook report.

Policymakers should focus on restoring price stability and easing cost of living pressures. Multilateral cooperation remains necessary to accelerate the green energy transition and prevent fragmentation, the IMF said.

Regarding inflation, the IMF said that “global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen for several decades.”

The cost of living crisis, tighter financial conditions in most regions, Russia’s invasion of Ukraine and the ongoing COVID-19 pandemic are weighing heavily on the outlook. Global growth is expected to slow from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is the weakest growth profile since 2001, excluding the global financial crisis and the acute phase of the COVID-19 pandemic, says the IMF.

Global inflation is expected to rise from 4.7% in 2021 to 8.8% in 2022, but decline to 6.5% in 2023 and 4.1% by 2024. Monetary policy should stay the course to restore price stability, and fiscal policy should aim to ease cost of living pressures while maintaining a sufficiently restrictive stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is needed to accelerate the green energy transition and prevent fragmentation, the IMF said.


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