India’s growth projection being revised, might be lower than earlier forecast: IMF official

The IMF is in the process of revising India’s growth projection for 2022, which could be lower than its earlier forecast of 8.2 per cent, amid risks of a global stagflation, a senior official of the international organisation said on Tuesday.

In April, the International Monetary Fund had lowered India’s growth projection to 8.2 per cent as compared to 9 per cent estimated in January. By 2023, the country is expected to grow at 6.9 per cent, it said. IMF is currently revising India’s growth forecast for 2022, which may be lower than 8.2 per cent. This is work in progress at the moment,” IMF Senior Resident Representative in India Luis Breuer said at an interactive session on World Economic Outlook’ organised by the MCC here.

Also read: Fiscal deficit for 2021-22 at 6.7 pc of GDP, lower than earlier estimate: CGA

He said the country is facing high inflation with low employment, which will not augur well for job opportunities. Breuer also called for stabilising debt at higher levels, which was a result of the impact on public finances due to the COVID-19 pandemic, and the need to protect vulnerable sections of the society. India is being seen as an emerging economy, which is recovering at the moment, he said.

The IMF official said central banks across the US and Europe have started to increase interest rates to fight growing inflation caused by a surge in commodity prices and supply disruptions. “The US Federal Reserve is expected to hike interest rates in future and the world economy is likely to plateau at 3.6 per cent,” he said, adding, the increased cost of borrowing will have its impact on growth rates.

Real interest rates may rise and a hike in US rates will suck in capital from the rest of the world due to high returns,” Breuer said. Stagflation is defined as a situation of high inflation and stagnant growth. He also said the pandemic is not over, and the lockdown in Beijing is yet to be withdrawn unlike in Shanghai. “China, being the factory of the world, the shutdown will disrupt global supplies. There is a risk of China facing a slowdown, which will have a negative impact on India,” he said. A one per cent drop in China’s GDP growth will reduce India’s by 0.6 per cent, more than the combined decline of the UK and US together, Breuer said.