The latest edition of the International Monetary Fund’s (IMF) World Economic Outlook cut its forecast for India’s Gross Domestic Product (GDP) growth in FY 2022-23 to 8.2%, making it the fastest-growing major economy in the world, almost twice faster than China’s 4.4 %.

Indian Scenario:

  • It has also lowered India’s growth projection by 0.8 % points for 2022-23 from its previous forecast (9%) for the same period in 2021.
  • In 2021, India registered a growth rate of 8.9 %.
  • In 2023-24, India is estimated to grow at 6.9 %.
  • With import bills rising due to high commodity and fuel prices, the IMF estimates India’s current account deficit to widen to 3.1% in FY 2022-23 from 1.6% in FY 2021-22.
  • India was “suffering like many other countries because of the Russia –Ukraine war and negative terms of trade shock “due to higher food and energy prices weighing down trade balances.
  • Additionally, external demand was also softening as the rest of the world’s growth was impacted.

Global Scenario:

  • The IMF has projected global growth at 3.6 % in 2022 and 2023, 0.8 and 0.2 % lower than in the January 2022 forecast, respectively.
  • A deceleration in global growth dampens India’s growth prospects especially because it would lead to lower demand for Indian exports.
  • The downgrade largely reflects the war’s direct impacts on Russia and Ukraine and global spillovers.
  • The recent lockdowns in key manufacturing and trading hubs such as Shenzhen and Shanghai (China) due to the resurgence of covid cases would likely compound supply disruptions elsewhere in the region and beyond.

IMF’s Recommendations

  • It recommended monetary tightening by central banks to keep inflationary expectations in check amid global supply disruptions caused by the war in Ukraine.
  • The IMF warned that the war would “severely set back the global recovery,” slow growth and stoke inflation.
  • Monetary authorities should carefully monitor the pass-through of rising global prices to domestic inflation expectations to calibrate their responses.
  • The IMF report backed targeted income support by governments to alleviate stress on household budgets in countries facing large price increases.

International Monetary Fund

  • The IMF was set up along with the World Bank after the Second World War to assist in the reconstruction of war-ravaged countries.
  • The two organizations agreed to be set up at a conference in Bretton Woods in the US. Hence, they are known as the Bretton Woods twins.
  • Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its near-global membership. India joined on 27th December 1945.
  • The IMF’s primary purpose is to ensure the stability of the international monetary system — the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other.
  • The Fund’s mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.


About OnPage

Check Also

What to do with spent nuclear fuel?

Syllabus:  Alternate fuel Context: Japan has started releasing treated radioactive water from the beleaguered Fukushima …

Leave a Reply

Your email address will not be published. Required fields are marked *

Get Free Updates to Crack the Exam!
Subscribe to our Newsletter for free daily updates