This is a massive cut compared to its previous forecast of 7.4%, which it gave in July.
In its latest annual World Economic Outlook report released on Tuesday, the IMF said the second quarter reflects weaker-than-expected and greater contraction in external demand.
For the next year 2023, India is projected to grow at 6.1%.
Last week, the World Bank also slashed India’s growth forecast for the fiscal year 2022-23 to 6.5%, down 1% from its previous June 2022 estimate. It cited the deteriorating international environment as the reason for the reduction in GDP.
However, Hans Timmer, Chief Economist of the World Bank for South Asia, also said that India has performed relatively well compared to other countries in South Asia.
“India is doing better than the rest of the world. India has more buffers, especially large reserves in the central bank. It is very helpful,” he said.
Timer also praised the Indian government for responding very proactively to the COVID crisis.
Estimates from both the IMF and the World Bank, however, fall short of the Reserve Bank of India’s (RBI) estimate of 7.2% GDP growth in FY13.
Announcing the third monetary policy for FY23 on 30 September, RBI’s Monetary Policy Committee (MPC) retained its GDP growth forecast for the current fiscal at 7.2%. But, it cautioned against a negative spread of geopolitical tensions and a slowdown in the global economy.
‘the worst is yet to come’
Meanwhile, the IMF report called for caution for the world’s major economies and said global growth is expected to slow further next year.
“The worst is yet to come and for many people 2023 will feel like a recession,” said IMF economic adviser Pierre-Olivier Gourinches in a blog post.
Global growth is projected to range from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is the weakest growth profile since 2001, excluding the global financial crisis and the acute phase of the COVID-19 pandemic.
IMF Managing Director Kristalina Georgieva warned in Washington against the backdrop of this week’s downfall that “recession risks are rising” around the world and the global economy is facing a “historic period”. fragility”.
The world economy has faced a wild ride since the Covid-19 hit in early 2020. First, the pandemic and the lockdown it caused brought the world economy to a standstill in the spring of 2020.
US, China GDP decline
The IMF has also cut forecasts for the two largest economies, the United States and China.
US economic growth is pegged at 1.6% this year due to an unexpected contraction, which is 0.7 points lower than the fund’s July forecast.
“The decline in real disposable income is eating into consumer demand, and higher interest rates are taking a significant toll on spending,” the IMF said.
The Federal Reserve is aggressively raising interest rates to cushion rising inflation, which is slowing economic activity. And the central bank has said that further growth is likely.
The recession in the euro area is expected to deepen next year, the IMF said, and growth in China is projected to hit its lowest rate in decades – apart from during the initial coronavirus outbreak.
Meanwhile, China’s economy is expected to grow by 3.2% this year, slightly below what was originally forecast.
The IMF warned that the fall in China’s asset sector could have an impact on the domestic banking sector and hit growth.
‘Monetary normalization continues’
IMF chief economist Pierre-Olivier Gourinches also urged central banks of major economies to “stay on course” in their efforts to normalize monetary policy and tackle inflation.
“What we are recommending is that central banks stay in this direction,” Gowrynchas told a briefing at the annual meetings of the IMF and the World Bank. “This does not mean that they should accelerate compared to what they are doing … but it also does not mean that they should pause on the path of monetary normalization.”
(with inputs from agencies)