The International Monetary Fund has slashed its estimate for India’s GDP growth in the current financial year started April by 60 basis points to 6.8% from a previously expected 7.4%, on account of lower-than-expected growth in Apr-Jun and weak external demand.
At 13.5%, the Indian economy expanded at the fastest pace in a year in Apr-Jun, but this was on a low base and also lower than expectation of 15.0% in an Informist poll. The IMF’s forecast for 2022-23 is 20 bps lower than the projection of the Reserve Bank of India.
The latest cut by the multilateral agency marks the third downward revision in India’s 2022-23 GDP growth forecast since April. It had cut India’s GDP growth projection by 80 bps each in April and July.
Last week, the World Bank also cut India’s 2022-23 GDP growth forecast by 100 bps to 6.5%, one of India’s lowest growth projections by any multilateral agency this year.
The IMF, however, retained its projection for 2023-24 at 6.1%.
The multilateral agency has pegged India’s inflation rate at 6.9% in 2022-23, 20 bps higher than the RBI’s estimate. Inflation in India has remained uncomfortably above the central bank’s upper tolerance limit of 6% every month this year.
The IMF has retained its 2022 global growth forecast at 3.2%, but cut the growth projection for 2023 by 20 bps to 2.7%. More than a third of the global economy will contract this year, it said.
It has warned that the worst is yet to come, and 2023 will feel like a recession.