IMF Downgrades India's Economic Growth Forecast For FY22 To 9.5% Due To Impact Of Second Wave

IMF expects India's gross domestic product (GDP) to grow by 8.5 per cent, 160 basis points higher than its earlier projection, in the next financial year (FY23)

International Monetary Fund (File Photo/AFP)

New Delhi: In view of the tough economic situation, the International Monetary Fund (IMF) has sharply reduced India’s growth projection by 300 basis points to 9.5 per cent for the current financial year from 12.5 per cent estimated earlier in April.

In its latest edition of flagship World Economic Outlook (WEO) report released on Tuesday, the agency cited the reason for downward revision as the “lack of access to vaccines” and the chances of the subsequent waves of coronavirus.

“Growth prospects in India have been downgraded following the severe second Covid wave during March–May and expected slow recovery in confidence from that setback,” IMF noted. The projections of IMF in current fiscal are in line with the Reserve Bank of India, but moderately optimistic than those of World Bank.

According to the World Bank projection, India's economy is expected to grow at 8.3 per cent in 2021 and 7.5 per cent in 2022, even as the recovery is impacted by an unprecedented second wave of the Covid-19.

On the other hand, IMF expects India's gross domestic product (GDP) to grow by 8.5 per cent, 160 basis points higher than its earlier projection, in the next financial year (FY23). If the GDP growth takes place as estimated then India would become the world’s most rapidly expanding large economy with the closest competitor, China, is projected to grow by 5.7 per cent.

As per the forecast, those countries with high vaccination coverage, such as the United Kingdom and Canada, will witness a mild economic impact while those where vaccination is slow, such as India and Indonesia, will witness maximum impact among G20 economies. The protracted weakness in activity is assumed to inflict persistent damage on economies’ supply capacity, it said.