In a report released by the International Monetary Fund, the IMF has projected India’s growth to decelerate to 6.1% in FY 24 from the 6.8% it has predicted for FY 23. As per the report, reflecting broad-based price pressures, inflation is projected at 6.9 percent in FY 22-23 and is expected to moderate only gradually over the next year. The report states that current account deficit is expected to increase to 3.5 percent of GDP in FY 22-23 as a result of both higher commodity prices and strengthening import demand.
While the economy has rebounded from pandemic-related downturn, the IMF warns that uncertainty around the outlook is high, with risks tilted to the downside. A sharp global growth slowdown in the near term would affect India through trade and financial channels. Intensifying spillovers from the war in Ukraine can cause disruptions in the global food and energy markets, with significant impact on India.
Over the medium term, reduced international cooperation can further disrupt trade and increase financial markets volatility. Domestically, rising inflation can further dampen domestic demand and impact vulnerable groups. On the upside, however, successful implementation of wide-ranging reforms or greater than expected dividends from the remarkable advances in digitalization could increase India’s medium-term growth potential.
