The International Monetary Fund (IMF) joined other international organisations in lowering its prediction for India’s economic growth in 2022 from 7.4% to 6.8% on Tuesday. In its July forecast, the IMF predicted that India’s GDP will rise by 7.4% during the fiscal year that began in April 2022. Even that prediction was less than the 8.2% predicted in January of this year.
India’s growth rate in the fiscal year 2021–2022 was 8.7%. (April 2021 to March 2022). According to the IMF’s annual World Economic Projection report, which was published on Tuesday, the outlook for India’s growth in 2022 is 6.8%, which is a 0.6 percentage point drop from the July prediction due to a weaker-than-expected second-quarter result and more muted external demand.
Global growth is anticipated to decline from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. Except for the global financial crisis and the severe phase of the COVID-19 epidemic, this is the worst growth profile since 2001. The IMF stated that the economic growth projections take into account significant slowdowns for the largest economies, including a contraction of the US GDP in 2022’s first half, a contraction of the euro area’s GDP in 2022’s second half, and prolonged COVID-19 outbreaks and lockdowns in China with an intensifying property sector crisis.
According to Pierre-Olivier Gourinchas, Economic Counselor and Director of Research at the IMF, “the global economy continues to face steep challenges, shaped by the lingering effects of three powerful forces: the Russian invasion of Ukraine, a cost-of-living crisis brought on by persistent and broadening inflation pressures, and the slowdown in China.”
The three greatest economies — the United States, the European Union, and China — will continue to stagnate, while more than one-third of the global economy will see a decline in 2023. In summary, he stated, “2023 will seem like a recession to many people, and the worst is yet to come.” China’s projected growth rate is 3.2%, which is less than the 8.1% growth rate for 2021.
China’s economy has suffered as a result of the periodic lockdowns imposed by its zero-COVID policy, particularly in the second quarter of 2022. Additionally, the property sector, which makes up approximately one-fifth of China’s economic activity, is deteriorating quickly.
According to Gourinchas, “this will have a significant impact on global commerce and activity given the size of China’s economy and its significance for global supply chains.” The tightening of monetary and financial conditions in the US will cause growth to drop to 1% in 2013. Due to a deteriorating real estate market and ongoing lockdowns, the IMF has reduced China’s GDP prediction for the next year to 4.4%, he stated in a blog post.
“The invasion of Ukraine by Russia has been severely destabilising the world economy. In addition to the mounting and needless loss of life and livelihood, it has caused a major energy crisis in Europe that is dramatically raising living expenses and impeding economic activity “added he.
Inflation and uncertainty
A more significant than anticipated decline in global economic activity is currently taking place, and inflation is at its highest level in many years. The prognosis is adversely impacted by the rising cost of living, tightening financial circumstances across the board, Russia’s invasion of Ukraine, and the persisting COVID-19 epidemic. From 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023, global growth is anticipated to decline. Except for the global financial crisis and the severe phase of the COVID-19 epidemic, this is the worst growth profile since 2001.
Forecasts predict that the rate of global inflation would increase from 4.7 percent in 2021 to 8.8 percent in 2022 before falling to 6.5 percent in 2023 and 4.1 percent by 2024. The goal of fiscal policy should be to reduce cost-of-living pressures while keeping a suitably restrictive posture in line with monetary policy. Monetary policy should continue its current trajectory to restore price stability. By increasing productivity and relieving supply limitations, structural changes may help the battle against inflation even more, while international collaboration is essential for advancing the transition to green energy quickly and avoiding fragmentation.
Prospects and Policies Worldwide
Widespread and more severe than anticipated, the global economy is slowing down, and inflation is at its highest level in decades. The outcome of the Ukrainian conflict, China’s economic development expectations, and the alignment of monetary and fiscal policy all influence the economic picture.
Risks are still unusually high: monetary policy could determine incorrectly the best course of action to lower inflation; diverging policy trajectories in the biggest economies could accelerate the strengthening of the US dollar; tightening global financing could result in debt distress in emerging markets; and a worsening of China’s property sector crisis could stymie growth. The goal of policymakers should be to ease cost-of-living pressures while restoring price stability. To accelerate the transition to green energy and avoid fragmentation, multilateral collaboration is still essential.
edited and proofread by nikita sharma
