Dark Clouds Ahead: IMF Cuts India’s GDP Forecast to 6.8 Percent

New Delhi: The International Monetary Fund (IMF) on Tuesday cut its projection of India’s gross domestic product (GDP)  growth forecast in 2022 to by 60 basis points (bps) to 6.8 percent. This reflects a weaker-than-expected outturn in the second quarter and more subdued external demand. This was announced in the IMF's latest World Economic Outlook report. 

The economic growth at 6.8 percent is below that of the Reserve Bank of India (RBI) as the central bank had lowered it on September 30 by 20 basis points to 7 percent. It may be noted here that one bps is one-hundredth of a percentage point. 

India’s growth forecast for FY23 was downgraded to 7.4% in July from 8.2 percent estimated in April. The growth projection was slashed in April to 8.2 percent due to higher commodity prices.

“The outlook for India is for growth of 6.8 per cent in 2022, a 0.6 percentage point downgrade since the July forecast, reflecting a weaker-than-expected outturn in the second quarter (April-June) and more subdued external demand,” IMF said. 

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According to Pierre-Olivier Gourinchas of IMF, “the global economy continues to face steep challenges” owing to the lingering effects of Russian invasion of Ukraine and the slowdown in China. It is said more than a third of the global economy will contract in 2023 as the three largest economies — the United States, the European Union, and China — will continue to stall. 

“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” Gourinchas wrote in his forward to the World Economic Outlook.