The International Monetary Fund (IMF) has retained India’s GDP growth forecasts at 9.5% in 2021 and 8.5% for 2022, but trimmed the global growth outlook, saying the recovery has lost momentum and become increasingly divided.
Earlier in July this year, the IMF has cut India’s growth forecast by 300 basis points to 9.5% for the current financial year from 12.5% estimated earlier in April.
The Washington-based agency said that India’s monetary policy projections are consistent with achieving the Reserve Bank of India’s inflation target over the medium term.
Recently, the Reserve Bank of India (RBI) has also maintained its GDP growth target for this year at 9.5%. This consists of 7.9% growth in Q2, 6.8% in Q3 and 6.1% in Q4 of 2021-22.”
India’s gross domestic product (GDP) had surged 20.1% in the April-June quarter of FY22, according to the data released by the government’s statistics office.
Compared to the July forecast, the global growth projection for 2021 has been revised down marginally to 5.9% and is unchanged for 2022 at 4.9%.
The United States is projected to grow at 6% this year and 5.2% the next year. China, on the other hand, the IMF said is projected to grow at 8% in 2021, down 0.1 percentage points from its July estimate. The GDP of China is projected to grow at 5.6% in 2022.
The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics, IMF chief economist Gita Gopinath said.
“The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions. Partially offsetting these changes, projections for some commodity exporters have been upgraded on the back of rising commodity prices,” Gopinath added.
Gopinath said the setbacks, due to the “great vaccine divide,” will impact the restoration of living standards, and a prolonged pandemic downturn “could reduce global GDP by a cumulative $5.3 trillion over the next five years.”
Central banks were told they could “generally look through” transitory inflation and avoid tightening monetary policy until they can secure more clarity, but that they should be prepared to act quickly if their economies strengthen faster than expected or if inflation expectations build.
In financial markets, the IMF said that “stretched asset valuations” meant investor sentiment could shift rapidly by adverse news on the pandemic or policy. Amid pressing concerns are the impasse over the US federal debt limit and possible weakness in China’s property sector.
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