India GDP forecast slashed by both World Bank and IMF by 0.7% and 0.8% respectively
Two of the world’s most popular financial agencies World Bank and the International Monetary Fund (IMF) have slashed India’s GDP forecast for FY 2022-23. The World Bank has cut down India’s GDP forecast by 0.7% bringing the earlier prediction of 8.7% to 8%. The IMF, on the other hand, has brought down its forecast by 0.8%, which brings the country’s latest GDP forecast from 9% to 8.2%.
World Bank Cuts India’s GDP Forecast
- Let’s start with the World Bank first. The international financial agency has reduced India’s growth forecast to 8% from the earlier estimate of 8.7%. The key reasons behind this are the disruption in global supply chains caused by the Russia-Ukraine crisis and rising inflation on the global scale.
- Last Wednesday, the World Bank lowered its growth forecast for the entire South Asian region, excluding Afghanistan, by a full percentage to 6.6%. Pointing out the reason for lowering the growth rate of South Asia's largest economy India, the international lender cited constrained household consumption due to incomplete recovery of the labour market from the effects of COVID-19 and the rising inflation.
The international bank, however, kept the next year’s growth outlook for Pakistan unchanged, which is the region’s second largest economy after India. It even increased the growth forecast for the current year ending in June from 3.4% to 4.3%, i.e; by 0.9% net.
The growth outlook for the Maldives received a massive cut, from 11% to 7.6%. The key reason here as well remains the large oil imports. The World Bank also cited that since the country earns a lot from tourism, there will be a slump in business due to fewer arrivals of tourists from countries like Russia and Ukraine.
Surprisingly, the island nation Srilanka, which is going through a financial crisis, has received a raise in growth outlook from the World Bank. The growth forecast for Srilanka has been increased to 2.4% from 2.1%. However, the international lender warned that the island nation’s outlook was highly uncertain owing to fiscal imbalances.
One of the key and common reasons for cutting the growth outlook of all South Asian countries (excluding Afghanistan) is the region’s dependency on oil imports, the prices of which spiked due to the Russia-Ukraine crisis.
World Bank Vice President for South Asia, Hartwig Schafer, said in a statement, "High oil and food prices caused by the war in Ukraine will have a strong negative impact on peoples’ real incomes"
IMF also slashed growth outlook for India
- The other most important global lender IMF has also decreased the growth forecast for India. In its latest World Economic Outlook report released on last week’s Tuesday, the international lending agency cut India’s GDP forecast from 9% to 8.2%.
- IMF cited subdued domestic demand due to rising inflation and lower net exports. It also slashed the South Asian nation’s growth outlook for FY24 from 7.1% to 6.9%.
- Not only India, the IMF cut the global growth forecast by nearly a percentage and tagged inflation as an immediate danger for all the nations around the world.
- It now projects global economic growth to be at 3.6% both for 2022 and 2023, a decrease of 0.8% and 0.2% respectively from its previous forecast.
- The international lender cited the same reasons as the World Bank for downgrading its growth outlook of the economies.