"India Doing Better Than Most Other Countries" Says IMF Despite Cutting 2022's GDP Growth Forecast

At a time when nations around the world are facing high inflation and are slowing down in terms of economic growth, a top official from the IMF (International Monetary Fund) has praised India.

The IMF's Asia and Pacific Director, Krishna Srinivasan, yesterday said, "India has not remained unimpacted, but is doing better and is in a relatively bright spot compared to other countries."

shutterstock

"We expect countries accounting for 1/3 of the global economy to go into a recession this year or the next. And inflation is rampant. So that is the overarching story," Srinivasan said.

"Almost every country is slowing. In that context, India is doing better and is in a relative bright spot compared to the other countries in the region," Srinivasan said, as per the PTI report.

In its World Economic Outlook (WEO), the IMF on Tuesday projected a growth rate of 6.8% in 2022, as compared to 8.7% in 2021 for India. It had earlier projected a 7.4% growth rate for 2022.

The projection for 2023 has been lowered to 6.1%. More than a third of the global economy will contract in 2023, while the three largest economies, i.e., the United States, the European Union, and China, will continue to stall, the projection mentioned.

As per the report, the IMF's projections include 3.6% growth rate for the UK for 2022, 3.3% for Canada, 3.2% for China, 3.1% for the Euro Area, and 4.3% for Spain, amongst others.

¡°Worst Is Yet To Come¡±

"In short, the worst is yet to come, and for many people, 2023 will feel like a recession," said Pierre-Olivier Gourinchas, the economic counsellor and the director of research at the IMF, in his forward to the WEO released during the annual meeting of the IMF and the World Bank, as per the report.

Beyond that, there are three underlying headwinds. One, of course, is that financial conditions are tightening because central banks and Asian economies are tightening to address inflation.

Second is Ukraine, a war that has led to an increase in food and commodity prices, widening current account deficits. And the third is in the region itself, where China is slowing down, he observed. A combination of these factors is driving prospects down across many parts of Asia, including India.

shutterstock

Also Read: JPMorgan Chase CEO Warns Of Recession In 2023

What IMF Official Said About RBI

"India is having an effect with external demand coming down. Also, domestically, inflation has been rising. What the RBI has done is tightened monetary policy. Rightfully so. They have been on a proactive tightening monetary policy," he said.

"Now, what that means is that there has been a bearing on domestic demand. You have inflation, which affects consumer demand, and when you try to address inflation by tightening monetary policy, it will bear upon investment. And so, for both reasons, you see some slowing in India, and that's why we revised it to 6.8 per cent this year and to 6.1 per cent the next year," director Srinivasan added.

Observing that the Indian government has an ambitious plan for CAPEX (capital expenditure), director Srinivasan also said the country needed to continue with it because it would give a boost to domestic demand.

The Indian government, he said, is addressing the impact of inflation on the poor and the vulnerable, which is very good. "They have cut excise taxes, which is across the board. That is both good and bad. It is good in the sense that it provides relief on the price side, but it's not well-targeted. In the context of limited fiscal space, you want these measures that alleviate inflation's impact to be more targeted. We would want more targeted support for the poor and vulnerable. The free rations are one," he said, as per PTI.

"More FDI Would Be Good For India"

Opening up sectors for greater foreign investment would be good for India. "What we've seen is in the initial phase of the crisis, you had capital going out of India, and then now it's coming back, trying to attract equity capital in FDI, that would be very good. That will boost things," he said.

"India has done phenomenally on digitalisation," director Srinivasan said. "If you look at the digital public infrastructure in India, it's quite amazing. You can leverage digitalisation to address many things, which both short term and long term to have, to boost growth, both in the near term and over the longer term," he added.

As per the report, India took a hit to the chin during the delta wave of the COVID-19 crisis, he said. But since then, they've come back very strongly in terms of vaccinating a large swath of the population.

¡°About 70% of the population is fully vaccinated. Vaccinating a country with 1.4 billion people is no easy task. About 70% of the population is fully vaccinated. Vaccinating a country with 1.4 billion people is no easy task. And they've done a very good job there. They've also been very judicious in employing the resources to support employment, health care, and the poor and vulnerable. "By tackling the pandemic head-on, they have mitigated what could be an important headwind," the IMF director said.

For the latest and more interesting financial news, keep reading Indiatimes Worth. Click here.