The global financial institution International Monetary Fund (IMF) has cut India's economic outlook by 80 basis points to 7.4% for the financial year 2022-23. In its previous estimate in April 2022, the IMF had projected the Indian economy to grow at 8.2% in FY23. The IMF's current observations on India's GDP growth are still higher than the apex bank RBI's (Reserve Bank of India) estimates of a 7.2% growth rate in FY23.
The IMF, in its latest issue of World Economic Outlook update 'Gloomy and More Uncertain', has also cut India's economic growth forecast for FY24 to 6.1%. "For India, the revision reflects mainly less favourable external conditions and more rapid policy tightening," says the IMF report.
China will also see a sharp slowdown in economic growth. The IMF has cut the economic forecast for China by 1.1 percentage point to 3.3% in 2022–23, which will be the lowest growth in more than four decades, excluding the initial COVID-19 crisis in 2020, primarily due to COVID-19 outbreaks and lockdowns.
"For emerging market and developing economies, the negative revisions to growth in 2022–23 reflect mainly the sharp slowdown of China’s economy and the moderation in India’s economic growth," says the report.
On the global level, growth revisions for major advanced economies in 2022–23 are generally "negative", says the IMF. The global growth will be 3.2% in 2022 and moderates to 2.9% in 2023, lower than projected in the IMF's April report, by 0.4 and 0.7 percentage point, respectively.
As per the IMF, Saudi Arabia will be the fastest growing economy in FY23 at 7.6%, followed by India at 7.4% and Spain at 4.0%. Russia's economy, owing to the unprecedented Western sanctions, will see its economy record negative growth of 6% in FY23.
The baseline growth in the United States has been cut by 1.4 percentage points and 1.3 percentage points to 2.3% and 1% in 2022 and 2023, respectively. It reflects "weaker-than-expected growth" in the first two quarters of 2022, with significantly less momentum in private consumption. This also reflects the erosion of household purchasing power and the expected impact of a steeper tightening in monetary policy.
Downgrades for China and the United States, as well as for India, are also driving the downward revisions to the global growth during 2022–23. The main reasons for the slower global growth remain the same as reported by the IMF in its April issue -- a sharper slowdown in China due to extended lockdowns, tightening global financial conditions and spillovers from the Ukraine war.
For emerging and developing Europe, the IMF projects the real GDP growth will shrink by 1.5 percentage points less in 2022 than predicted in the April outlook but grow by 0.4 percentage points less in 2023 on stronger-than-expected Russian export growth in 2022 and the recently announced additional sanctions on Russia in 2023.
Latin America and the Caribbean have also seen an upward revision of 0.5 percentage points in 2022 on robust recovery in Brazil, Mexico, Colombia, and Chile. The outlooks for countries in the Middle East and Central Asia and sub-Saharan Africa remain on average unchanged or positive, reflecting the effects of elevated fossil fuel and metal prices for some commodity-exporting countries, says the IMF.