'Worst To Come': IMF Cuts GDP Growth Forecast To 6.8% in FY22, Here's What It Means For India

The International Monetary Fund (IMF) has cut its growth forecast for India's gross domestic product (GDP) by 60 basis points to 6.8 per cent in the financial year 2022-23. The financial institution has also warned about the stumbling economy in its World Economic Outlook report.

The IMF said, "The outlook for India is for growth of 6.8 per cent in 2022, a 0.6 percentage point downgrade since the July forecast, reflecting a weaker-than-expected outturn in the second quarter (April-June) and more subdued external demand," Business Standard reported.

In the view of the IMF, the financial market's performance in 2022 will predict the growth of the financial year (FY) 2023, starting from April. In the July report, the IMF cut India's growth forecast to 7.4 per cent for FY23. Meanwhile, the IMF has kept its forecast for FY24 unchanged (6.1 per cent).

IMF Growth Forecast: 2023

USA🇺🇸: 1%
Germany🇩🇪: -0.3%
France🇫🇷: 0.7%
Italy🇮🇹: -0.2%
Spain🇪🇸: 1.2%
Japan🇯🇵: 1.6%
UK🇬🇧: 0.3%
Canada🇨🇦: 1.5%
China🇨🇳: 4.4%
India🇮🇳: 6.1%
Russia🇷🇺: -2.3%
Brazil🇧🇷: 1%
Mexico🇲🇽: 1.2%
KSA🇸🇦: 3.7%
Nigeria🇳🇬: 3%
RSA🇿🇦: 1.1%https://t.co/VBrRHOfbIE #WEO pic.twitter.com/0TDJbgSuka

— IMF (@IMFNews) October 11, 2022

Know The Causes Behind Economic Slowdown

Notably, IMF has become the third financial institution that has predicted India's GDP growth below 7 per cent after the State Bank of India and the World Bank. The IMF Economic Counsellor, Pierre-Olivier Gourinchas, while stating the reason for an economic slowdown, said, "The global economy continues to face steep challenges, shaped by the lingering effects of three powerful forces: Ukraine war, a cost-of-living crisis, inflation pressures, and the slowdown in China."

It has kept its global growth forecast unchanged at 3.2 per cent for FY22 but has cut it by 20 basis points to 2.7 per cent in 2023. It has also added that there is a 25 per cent chance that it would slip below 2 per cent.

3 Largest World Economies Will Continue To Stall

The IMF added, "More than a third of the global economy will contract in 2023, while the three largest economies—the United States, the European Union, and China—will continue to stall. In short, the worst is yet to come, and for many people, 2023 will feel like a recession," Gourinchas said.

On the other hand, Jamie Dimon, the chief of the biggest bank in the United States (US), JPMorgan Chase, has also warned that a 'very, very serious mix of headwinds is ready to affect the US and global economy, similar to a recession by mid-2023. The chief said, "The US economy was "actually still doing well" at present, and consumers were likely to be in better shape compared with the 2008 global financial crisis."

He added, "But you can't talk about the economy without talking about stuff in the future — and this is serious stuff." Dimon mentioned that rising interest rates, increasing inflation, and the Ukraine war are the most important factors to consider among the indicators that might affect the economic slowdown.

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