The international Monetary Fund (IMF) downgraded India’s growth projection by 0.8% to 8.2% in its World Economic Outlook report released on Tuesday, April 19th, citing the effects of the Russia-Ukraine war. It also projected that India’s economy will grow by 6.9% next year, which will make it one of the fastest growing economies of the world. Global GDP growth is projected at 3.6% for the year FY 2023, as opposed to 6.1% in 2021.
The war in Ukraine with Russia has not only had an immense “humanitarian costs”, but will also contract the economy of Ukraine by 35%, slow down the rest of the global economy, and cause rising inflation in fuel and food prices. Inflation in food and fuel prices were primarily affecting lower income countries with a high dependance on imports from the two countries, particularly Russia.
Other factors stressing the global economy, according to the report, is the rate hikes by central banks for controlling inflation, and the “fragmentation” of the global economy due to government and self-imposed sanctions and embargoes on Russia by various businesses. Lockdowns in China’s Shanghai as part of its ‘zero-COVID’ policy are also disrupting supply chains.
Economic Counsellor and Director of Research at IMF, Pierre Gourinchas, said: “We are seeing a significant downgrade in our growth estimates for India, of 0.8 percentage points for 2022 [ FY22-23],” IMF research director, Pierre-Olivier Gourinchas, said at a virtual press conference. India was “suffering like many other countries as a consequence of the war and negative terms of trade shock”.