IMF Cuts India's GDP Growth Forecast For FY22

The second wave of the pandemic has set back economic recovery in India, the IMF said, as it cut the country's growth forecast for the ongoing financial year.

India's GDP is estimated to grow by 9.5% in FY22 compared to the 12.5% forecast in April 2021, according to the world economic outlook published by the IMF on Tuesday. For FY23, GDP is estimated to grow by 8.5% compared to 6.9% estimated in April.

"Recovery has been set back severely in countries that experienced renewed waves—notably India," the IMF stated in its outlook. Growth prospects in India have been downgraded following the severe second Covid-19 wave during March–May and expected slow recovery in confidence from that setback, it said.

The global economy is projected to grow 6% in 2021 and 4.9% in 2022. While the forecast for the global economy remains unchanged from April, prospects for emerging market and developing economies have been marked down for 2021, especially for emerging Asia, according to the note. By contrast, the forecast for advanced economies is revised up.

Economic prospects have diverged further across countries, with vaccine access emerging as the principal fault line along which the global recovery splits into two blocs—almost all advanced economies that can look forward to further normalization of activity later this year and those that will still face resurgent infections and rising Covid-19 death tolls, the IMF said. The recovery, however, isn't assured even in countries where infections are currently very low so long as the virus circulates elsewhere, it cautioned.