The International Monetary Fund on Tuesday projected a 9% growth for India in financial year (FY) 2022 and 2023, and a 7.1% growth for FY24. These projections come as part of the latest revision to its flagship World Economic Outlook (WEO) report.
The report, titled 'Rising Caseloads, A Disrupted Recovery, and Higher Inflation', was scheduled to be released a week ago, but was postponed to incorporate the effect the spread the omicron variant of coronavirus and the ongoing pandemic has caused on the global economy.
The effect of the omicron variant, the IMF says, has been factored in the 2021 (or FY22) figure for India, which was 9.5% in the October iteration of the WEO, and is now 0.5 percentage points lower. The figures for FY23 and FY24 have both been revised 0.5 percentage points higher to the October iteration of the WEO. On a calendar year basis, India will grow 8.7% in 2022 and 6.6% in 2023.
The Indian government's estimates are close which estimate a 9.2% growth rate for FY22, owing to a base effect.
The world economy
The estimates for the whole world economy as a whole have also been lowered by 0.5 percentage points. It is now estimated to grow 4.4% in 2022.
"The global economy enters 2022 in a weaker position than previously expected. As the new Omicron COVID-19 variant spreads, countries have reimposed mobility restrictions", the IMF says.
The report has also highlighted projection markdowns in the two largest economies of the world: the United States and China. For the United States, the IMF has revised its growth for 2022 1.2 percentage points downwards: 4% now from 5.2% in October. "A revised assumption removing the Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary accommodation, and continued supply shortages produced a downward 1.2 percentage-points revision for the United States", the IMF said, referring to President Joe Biden's landmark 'Build Back Better' stimulus package and the winding up of the pandemic-era monetary support by the Federal Reserve.
China's projection is now 4.8%, from 5.4% in the October estimates. "In China, pandemic-induced disruptions related to the zero-tolerance COVID-19 policy and protracted financial stress among property developers have induced a 0.8 percentage-point downgrade", the report says.
A labour supply shortage, and inflation has also been flagged by the report. In 2022, the IMF expects consumer prices (a measure of inflation) to be 3.9% in advanced economies, higher 1.6 percentage points and 5.9% in the developing world, higher by one percentage point compared to the October WEO numbers.
"Elevated inflation is expected to persist for longer than envisioned in the October WEO, with ongoing supply chain disruptions and high energy prices continuing in 2022. Assuming inflation expectations stay well anchored, inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy in major economies responds", the IMF says.
The report notes that risks are on the downside, and warns against the disruption a new COVID-19 variant could cause.
Read the report here.