The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) report has slashed its gross domestic product (GDP) growth forecast of India to 8.2 per cent for fiscal year 2022-23 (FY23) from 9 per cent forecasted earlier. It said that higher commodity prices will weigh on private consumption and investment. This was one of the steepest cuts for emerging economies compared to the IMF’s January WEO forecasts.
The agency cut its global growth outlook for calendar year 2022 to 3.6 per cent from 4.4 per cent, saying that global economic prospects have worsened significantly due to commodity price volatility and disruption of supply chains caused by the war in Europe and added that both Russia and Ukraine could experience large GDP contractions.
As per the report, the multilateral institution cut the calendar year 2022 (or fiscal year 2022-23 in case of India and some other nations) GDP forecast for almost all developed and emerging economies. Notable downgrades to the 2022 forecast include Japan (0.9 percentage point) and India (0.8 percentage point), 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.
It also expected India’s FY23 current account deficit to be 3.1 per cent, compared with 1.5 per cent expected for FY22. There was also a cut in India’s FY24 GDP growth forecast to 6.9 per cent from 7.1 per cent estimated in IMF’s January report. The IMF’s projection of India’s retail inflation is now at 6.1 per cent, higher than the Reserve Bank of India’s (RBI’s) forecast of 5.7 per cent.
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