The International Monetary Fund (IMF) slashed India’s GDP prediction for FY22-23 by 0.8 percentage point to 8.2 percent on Tuesday, warning that Russia’s invasion of Ukraine will damage consumption and thus growth by raising prices.
In late February, Russia invaded Ukraine, destroying the country’s infrastructure and disrupting supply chains in a variety of product categories and foods in most regions of the world. Fuel prices rose as a result of new sanctions against Moscow, putting inflationary strains on global economies.
“Notable downgrades to the 2022 forecast include Japan (0.9 percentage point) and India (0.8 percentage point), reflecting in part weaker domestic demand – as higher oil prices are expected to weigh on private consumption and investment – and a drag from lower net exports,” the IMF said in its April 19 World Economic Report.
Despite the fact that the IMF’s growth forecast for India has been drastically reduced for the current fiscal year, it remains much higher than local projections. The Reserve Bank of India (RBI), for example, has forecasted 7.2 percent GDP growth for FY22-23.
According to the second advance estimate from the statistics ministry, India’s GDP would expand by 8.9% in FY22-23.
Even for FY24, the discrepancy in GDP growth predictions between the IMF and the RBI is significant. The Indian economy is expected to increase 6.9% next year, according to the multinational body, but just 6.3 percent according to the RBI.
The consequences are seen most strongly in the poorest countries, threatening to reverse recent advances made as they recovered from the Covid-19 outbreak, according to the report, and the dangers and uncertainty remain high.
In the report, IMF head economist Pierre-Olivier Gourinchas remarked, “The economic impacts of the war are spreading far and wide — like seismic waves that originate from the centre of an earthquake.”
Meanwhile, the IMF has complimented India’s strong economy while highlighting the government’s structural reforms in recent years.
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