IMF cuts India’s FY23 GDP forecast to 6.8%

The International Monetary Fund (IMF), in its latest World Economic Outlook report, cut its forecast for India’s gross domestic product (GDP) growth in financial year 2022-23 (FY23) by 60 basis points (bps) to 6.8 per cent, warning of a long and tough economic winter.

“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,” the IMF said.

In IMF parlance, 2022 would denote FY23 in case a nation follows a fiscal year starting April. For the rest, it would denote the current calendar year. In its July World Economic Outlook (WEO) report, the IMF had cut India’s FY23 growth forecast by 80 bps to 7.4 per cent.

The IMF maintained a forecast of 6.1 per cent for FY24.

With this, the IMF has joined other agencies that see India’s GDP growing below 7 per cent in this financial year, including the World Bank and State Bank of India. “The global economy continues to face steep challenges, shaped by the lingering effects of three powerful forces: The Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China,” said IMF Economic Counsellor Pierre-Olivier Gourinchas.

Gourinchas added that the current global shocks will re-open “economic wounds” that were only partially healed following the pandemic.

The agency kept its global growth forecast for 2022 unchanged at 3.2 per cent, but cut it by 20 bps to 2.7 per cent in 2023, with a 25 per cent chance that it may slip below 2 per cent.

“More than a third of the global economy will contract in 2023, while 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 said.

Some agencies which have cut India’s FY23 GDP forecast after official April-June data