New Delhi: The International Monetary Fund (IMF) on Tuesday reduced India's gross domestic product (GDP) growth forecast to 7.4 percent in 2022 from 8.2 percent projected in April this year.
The latest growth estimate is substantially lower compared to the 9 percent projected by the multilateral agency in January this year.
"For India, the revision reflects mainly less favorable external conditions and more rapid policy tightening," the IMF said in its July update of the World Economic Outlook (WEO).
The multilateral agency also cut India's GDP forecast for 2023 by 0.8 percentage points to 6.1 percent.
The IMF downgraded the growth projection for the world economy to 3.2 percent in 2022 and 2.9 percent in 2023 warning that the risk of unusually low growth is high.
"Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide––especially in the United States and major European economies––triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine," it said in the latest economic outlook.
Pierre-Olivier Gourinchas, IMF Chief Economist, said that tighter monetary policy will inevitably have real economic costs, but delaying it will only exacerbate the hardship. He further said that Central banks that have started their tightening cycle should stay the course until inflation is tamed.
"If some of the downside risks materialize, including a full shutdown of Russian gas flows to Europe, inflation will rise, and global growth will slow further to about 2.6 percent this year and 2 percent next year—a pace that has been undershot only five times since 1970," he said.
The multilateral lender noted that after a tentative recovery in 2021, the economic outlook has turned gloomy and uncertain, with the probability of a global recession.
"The global economy is slowing sharply. The war in Ukraine, rising energy and food prices, and supply-demand imbalances are feeding worldwide inflation," it said.
The IMF said that the negative revisions to growth in 2022–23 for emerging markets and developing economies reflect mainly the sharp slowdown of China’s economy and the moderation in India’s economic growth.
(With UNI inputs)