The International Monetary Fund on Tuesday slashed India's growth forecasts for the ongoing fiscal year (FY) to 6.8% from a previous estimate of 7.4%. On a calendar year basis, India will grow 6.9% from a previous estimate of 7.5% in 2022.
"The outlook for India is for growth of 6.8 percent in 2022––a 0.6 percentage point downgrade since the July forecast, reflecting a weaker-than-expected outturn in the second quarter and more subdued external demand––and 6.1 percent in 2023, with no change since July", the report said.
The multilateral financial institution released its latest projections for the world economy and its economic outlook as part of the October 2022 iteration to its flagship World Economic Outlook. The report is titled 'Countering the Cost-of-Living Crisis', in a reference to increasing rates of inflation around the world.
It joins a host of other institutions who have revised their forecasts for India's economic growth downward. To be sure, India will still be the world's fastest growing major economy, only that its growth will be slower than previously expected.
Last week, on October 6, the World Bank cut its forecasts for India from 7.5% to 6.5%. In its monetary policy outlook on September 30, the Reserve Bank of India too cut its forecast from 7.2% to 7%.
The theme behind the reasoning remains the same.
These institutions expect India will see strong consumer spending. But uncertainty still prevails as economies - including India - feel the heat of the aftermath of the Ukraine and Russia conflict. They also expect that India will be impacted by global monetary policy tightening as central banks raise their interest rates to slowly rollback an easy money policy resorted to during the pandemic and the resultant inflation spirals.
Also Read: World Bank Slashes India's Growth Forecast For FY23 At 6.5%
2023: The economic ship barely sails
The year 2023 is expected to be a tough one for world economic outlook as the developed world braces for a recession. By the data released, Europe looks to be barely afloat.
The world economy has taken a 0.2 percentage point hit, now expected to grow 2.7% next year. The euro area, where the euro is the common currency, will grow at only 0.5%, with its largest economy, Germany, expected to contract 0.3%. However, Spain and France (the second and fourth largest economies) are expected to grow only marginally, with Italy (the third largest economy) too expected to contract.
The United Kingdom is currently on the brink of a recession, with its economy contracting this August. The Bank of England has forecasted that it will enter one by the end of this year. Markets are reacting negatively to new fiscal measures by the new government under Prime Minister Lizz Truss, as the pound has depreciated to record lows against the dollar and yields on British bonds have surged.
The United States will grow just 1% next year, though its economic projections remains unchanged.