The IMF is in the process of revising India’s growth forecast for 2022, which may be lower than its previous forecast of 8.2 percent, amid risks of a global stagflation, a senior official of the international organization said on Tuesday.
In April, the International Monetary Fund had lowered India’s growth forecast to 8.2 per cent compared with 9 per cent in January. By 2023, the country is expected to grow by 6.9 percent, it said.
“The IMF is currently reviewing India’s growth forecast for 2022, which may be below 8.2 percent. This is currently work in progress,” said Luis Breuer, IMF Senior Resident Representative in India. on an interactive session on ‘World Economic Outlook’ organized by the MCC here.
He said the country is facing high inflation with low employment, which will not bode well for job opportunities.
Breuer also called for stabilizing debt at higher levels, which was a consequence of the impact on public finances due to the Covid-19 pandemic, and the need to protect vulnerable sections of society.
India is seen as an emerging economy, which is currently recovering, he said.
The IMF official said central banks in the US and Europe have begun to raise interest rates to combat rising inflation caused by rising commodity prices and supply disruptions.
“The US Federal Reserve is expected to raise interest rates in the future and the world economy is likely to plateau at 3.6 percent,” he said, adding, the increased cost of borrowing will have an impact on growth rates.
“Real interest rates can rise and an increase in US rates will suck up capital from the rest of the world because of high yields,” Breuer said.
Stagflation is defined as a situation of high inflation and stagnant growth.
He also said that the pandemic was not over, and that the lockdown in Beijing has yet to be withdrawn unlike Shanghai.
“China, as the factory of the world, will disrupt the shutdown global supplies. There is a risk that China will have a delay, which will have a negative impact on India,” he said.
A one percent drop in China’s GDP growth will reduce India by 0.6 percent, more than the combined decline of the UK and US together, Breuer said.