The IMF on Tuesday lowered India’s economic growth forecast by 0.5 percentage point to 9% for the current fiscal year, with its chief economist Gita Gopinath saying the slight downgrade is mainly due to the impact of the spread of the Omicron variant.
“If you look at fiscal year 2021-22, we have a slight decline of -0.5 percentage points and for the next fiscal year 2022-23 we have a slight upgrade of 0.5 percentage points. So the growth for the previous year is now nine percent and for this year it is now nine percent. We increased it slightly,’ Gopinath told reporters at a press conference here.
In its latest World Economic Outlook update on Tuesday, the International Monetary Fund cut India’s economic growth forecast to 9% for the current fiscal year ending March 31, joining a host of agencies that have lowered their projections due to concerns about the impact of the Omicron deployment on business activity and mobility.
The Washington-based international financial institution, which in October last year predicted GDP growth of 9.5% for India, but forecasts for the next fiscal year 23 (April 2022 to March 2023) at 7.1%. India’s economy contracted by 7.3% in the 2020-21 financial year.
Responding to a question, Gopinath explained that the main reason for the downgrade for the 2021-22 financial year comes from Omicron. Due to this variant of the coronavirus in the first quarter of this year, there were localized blockages and restrictions on activity and mobility, she noted.
“That impacts the growth numbers, which is why we have a slight deterioration and the postponement of the recovery is what is fueling a slight improvement for the next year,” Gopinath said.
The IMF forecast for the current fiscal year is down 9.2% from the Central Government Statistics Office and 9.5% from the Reserve Bank of India’s estimate. Its forecast is lower than S&P’s 9.5% and Moody’s projections of 9.3%, but higher than the World Bank’s 8.3% and Fitch’s 8.4%.
IMF says India’s outlook for 2023 is marked by expected improvements in credit growth and subsequently investment and consumption, building on the sector’s better-than-expected performance financial.
The IMF said global growth is expected to moderate from 5.9 in 2021 to 4.4% in 2022, half a percentage point lower for 2022 than in October’s WEO, largely reflecting declines expected in the two largest economies – the United States and China.
A revised assumption removing the Build Back Better fiscal policy program from the baseline, an early withdrawal of monetary easing and continued supply shortages produced a 1.2 percentage point downward revision for states United, he said.
In China, pandemic-induced disruptions related to the zero-tolerance policy against COVID-19 and prolonged financial strains among real estate developers led to a deterioration of 0.8 percentage points.
Global growth is expected to slow to 3.8% in 2023.
”While this is 0.2 percentage points higher than in the previous forecast, the upgrade largely reflects a mechanical recovery after the current headwinds to growth dissipate in the second half of 2022. The forecast is conditional on decline in adverse health effects to low levels in most countries by the end of 2022, assuming vaccination rates improve globally and therapies become more effective,” the report said.
In a blog post, Gopinath wrote that the continued global recovery faces multiple challenges as the pandemic enters its third year.
The rapid spread of the Omicron variant has led to new mobility restrictions in many countries and increased labor shortages, she said.
Supply disruptions are still weighing on activity and contributing to higher inflation, adding to pressures from strong demand and high food and energy prices, Gopinath wrote.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)