The International Monetary Fund (IMF) on Tuesday sharply lowered India’s economic growth forecast to 6.8% in its latest World Economic Outlook, compared to 7.4% it had estimated earlier in July, citing the impact of external headwinds and weaker than expected second quarter growth.
It highlighted that the global economy continues to face challenges including inflation, tightened financial conditions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic. The report pointed out that more energy and food price shocks might cause inflation to persist for longer while global tightening in financing conditions could trigger widespread emerging market debt distress. However, the IMF cautioned that the monetary policy could miscalculate the right stance to reduce inflation.
The multilateral agency retained India’s growth forecast for 2022-23 at 6.1%, despite lingering downside risks.
“The outlook for India is growth of 6.8%, a 0.6 percentage point downgrade since the July forecast, reflecting a weaker-than-expected outturn in the second quarter and more subdued external demand,” said the IMF in its World Economic Outlook: Countering the Cost-of-Living Crisis.

However, despite the growth forecast downgrade, India will remain one of the fastest growing key economies in the world in 2022 and 2023. China’s growth is estimated to slow to 3.2% in 2022 and by 4.4% in 2023.

India’s official data released in August showed that the economy grew well below expectations at 13.5% in the April-July quarter due to dismal performance of the manufacturing sector.

The IMF forecast follows a slew of downward revisions in growth by other agencies as well. The World Bank last week lowered India’s growth forecast to 6.5% for 2022-23, while the Asian Development Bank and the Reserve Bank of India cut the projection to 7%.