NEW DELHI: India’s economy is estimated to grow by 8.2% in the current fiscal year (2022-23), sharply slower than the International Monetary Fund’s (IMF) earlier forecast of 9% as the impact of Russia’s invasion of Ukraine weighs heavily on prices and disruption of supply chains.
In its latest World Economic Outlook (WEO) report, the IMF forecast India’s economy to grow by 6.9% in 2023-24. The latest GDP growth forecast for India is still higher than the Reserve Bank of India’s (RBI) estimate of 7.2% for 2022-23. The central bank had earlier lowered its growth estimate from 7.8%, citing the impact of the war in Ukraine and breakdown of supply chains. The finance ministry had earlier estimated the economy to grow in the 8%-8.5% range in 2022-23.
“As such, external positions are generally expected to deteriorate—particularly for net oil importers. 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,” according to the WEO.
India, however, will retain its tag as the fastest growing major global economy but it faces severe headwinds.
China is estimated to grow 4.4% in 2022-23 and 5.1% in 2023-24, a downgrade of 0.4 percentage point. The IMF cautioned that slowing growth in China’s economy has wider ramifications for Asia and for commodity exporters. The combination of more transmissible variants and a zero-Covid strategy entails the prospect of more frequent lockdowns, with attendant effects on private consumption in China.
The WEO said that the war in Ukraine will severely setback the global recovery, slowing growth and increasing inflation even further. The report projects global growth at 3.6% in 2022 and 2023 – 0.8 and 0.2 percentage lower than the January forecast, respectively. It said that the downgrade in global growth forecast reflects the war’s direct impact on Russia and Ukraine and global spillovers.
“This crisis unfolds even as the global economy has not yet fully recovered from the pandemic. Even before the war, inflation in many countries had been rising due to supply-demand imbalances and policy support during the pandemic, prompting a tightening of monetary policy. The latest lockdowns in China could cause new bottlenecks in global supply chains,” said IMF’s chief economist Pierre-Olivier Gourincha.
“Overall economic risks have risen sharply, and policy tradeoffs have become even more challenging,” he said.