IMF slashes India GDP growth forecast for FY23 to 8.2%

The International Monetary Fund, in its latest World Economic Outlook report released on Tuesday, slashed its forecast for India’s FY23 GDP growth to 8.2 per cent from earlier 9 per cent, 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.

Further, the international agency also lowered India's FY24 growth forecast by 20 bps to 6.9 per cent versus January forecast.

Additionally, the country's CPI-based inflation is seen at 6.1 per cent in FY23 and at 4.8 per cent For FY24, IMF further stated in its WEO forecast.

Earlier, the World Bank has slashed India's GDP forecast for FY23 to 8 per cent. Meanwhile, the Reserve Bank of India (RBI) has also sharply cut India's growth projection at 7.2 per fir the current fiscal.

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Meanwhile, IMF also slashed forecast for global economic growth by nearly a full percentage point, citing Russia's war in Ukraine, and warning that inflation was now a "clear and present danger" for many countries.

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.

The war is expected to slow growth and further increase inflation, the IMF in its report, while warning that its forecast was marked by "unusually high uncertainty."

Further sanctions on Russian energy and a widening of the war, a sharper-than-forecast deceleration in China and a renewed flare-up of the pandemic could further slow growth and boost inflation, while rising prices could trigger social unrest.

The global lender, which downgraded its forecasts for the second time this year, said it now projects global growth of 3.6% in 2022 and 2023, a drop of 0.8 and 0.2 percentage point from its January forecast, given the war’s direct impacts on Russia and Ukraine and global spillovers. 

Medium-term global growth is expected to decline to about 3.3% over the medium-term, compared to an average of 4.1% in the period from 2004 to 2013, and growth of 6.1% in 2021.

(With agency inputs)