The International Monetary Fund lowered its FY22 gross
domestic growth product (GDP) forecast for India to 9% from 9.5% predicted in
October, citing the emergence of the Omicron wave of the Covid-19 pandemic.

In its latest World Economic Outlook report, the IMF
raised the country’s GDP projection for FY23 to 9% from 8.5% earlier and to
7.1% from 6.6% for FY24. The multilateral agency also lowered its global growth
forecast for the calendar year 2022 to 4.4% from 4.9% projected in the October
WEO report.

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According to IMF, India’s prospects for 2023 (FY24) are
marked up on expected improvements to credit growth and, subsequently,
investment and consumption, building on the better-than-anticipated performance
of the financial sector.

It said the impact of the third wave was seen in the
latest projections and the October forecast had already considered the second
wave. On a calendar year basis, India’s GDP growth projections are 8.7% in 2022
and 6.6% in 2023.

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The world economy is entering 2022 in a weaker position
than previously expected.

The spread of the Omicron variant led to countries
imposing mobility restrictions and financial market volatility at the end of
2021. “Rising energy prices and supply disruptions have resulted in higher and
more broad-based inflation than anticipated, notably in the United States and
many emerging markets and developing economies,” the IMF said in its report.

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The global growth was expected to moderate from 5.9% in
2021 to 4.4% in 2022, half a percentage point lower for 2022 than in the
October forecast, largely reflecting forecast markdowns for the US and China.

For the US, the IMF has reduced its 2022 GDP forecast by
1.2 percentage points to 4%, given a revised assumption removing the Build Back
Better fiscal policy package from the baseline, early withdrawal of monetary
accommodation, and continued supply shortages.

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“In China, pandemic-induced disruptions related to the
zero-tolerance Covid-19 policy and protracted financial stress among property
developers have induced a 0.8 percentage-point downgrade,” the IMF said. It now
sees China’s economy expanded 4.8% in 2022.

The WEO report said “Global growth is expected to slow to 3.8% in 2023. This
is 0.2 percentage points higher than in the October 2021 WEO, the upgrade largely
reflects a mechanical pickup after current drags on growth dissipate in the
second half of 2022”.

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According to the IMF report, monetary policy in many
countries will need to continue on a tightening path to control inflation
pressures, while fiscal policy will have to prioritize health and social
spending while focusing support on the worst affected.