DNA Explainer: Why has IMF announced global growth cuts? Know its impacts on Indian economy, inflation

In a jarring economical report released recently, the International Monetary Fund (IMF) said that global growth is expected to slow down due to several factors that are severely impacting the trade and economy of developing countries.

The downgrade of the global growth forecast comes in the backdrop of the war between Russia and Ukraine and the Covid-19 pandemic, which has led to heavy implications on trade and international relations in a lot of countries.

IMF economic counsellor Pierre-Olivier Gourinchas said in a blog post accompanying the fund's latest World Economic Outlook, “This year's shocks will re-open economic wounds that were only partially healed post-pandemic.”

The IMF has also predicted in its global growth forecast that a lot of countries will have to face recession-like circumstances in 2023 or the year after that. "The worst is yet to come and, for many people 2023 will feel like a recession," said Gourinchas.

Implications of IMF report on Indian economy

Not just the global growth, but IMF also cut the economic growth of India by a significant margin in its World Economic Outlook. The economic growth of India has been cut from 7.4 percent to 6.8 percent projection for the fiscal year of 2022.

India had grown at 8.7 percent in the 2021-22 fiscal (April 2021 to March 2022). In its annual World Economic Outlook report released on Tuesday, the IMF said the outlook for India is the growth of 6.8 percent in 2022, a 0.6 percentage point downgrade since the July forecast, reflecting a weaker-than-expected outturn in the second quarter and a more subdued external demand.

The main cause behind the cut down of India’s economic growth has been linked with the global Covid-19 pandemic, though according to IMF, it seems to be doing better than other countries.

IMF director of the Asia and Pacific department, Krishna Srinivasan, said, “Almost every country is slowing. In that context, India is doing better and is in a relatively bright spot compared to other countries.”

Meanwhile, the slowdown of the growth projections of the Indian economy can mean that inflation can rise in the country, and the price of basic commodities can increase further.

The economic growth projections reflect significant slowdowns for the largest economies: a US GDP contraction in the first half of 2022, a euro area contraction in the second half of 2022, and prolonged COVID-19 outbreaks and lockdowns in China with a growing property sector crisis, the IMF said.

(With inputs from agencies)

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