Context
The International Monetary Fund’s most recent World Economic Outlook report reduced India’s economic growth forecast for 2022 to 6.8%. This is a significant decrease from its previous forecast of 7.4% issued in July 2022.
Relevance
GS Paper 2: Important International institutions, agencies and fora- their structure, mandate.
Mains Question
What are the main criticisms of the World Bank and the IMF? Discuss. (150 Words)
Concerning the World Economic Outlook
- The World Economic Outlook (WEO) is a survey report published twice a year by the International Monetary Fund.
- The report analyses and forecasts economic developments and policies in IMF member countries.
- The report summarises the state of the global economy and highlights risks and uncertainties that could jeopardise growth.
- The IMF conducts surveys of economists and other experts twice a year to publish the WEO report, in April and October.
Summary of Recent Events:
- In its October edition of the World Economic Outlook report, the IMF reduced India’s growth forecast to 6.8% in 2022.
- This is due to a weaker-than-expected second-quarter output and more subdued external demand.
- India is expected to grow at a 6.1% annual rate in 2023.
The IMF’s Growth Forecast
- IMF has reduced its forecast for global growth from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023.
- With the exception of the 2008 global financial crisis and the sharp drop immediately following the Covid-19 pandemic in 2020, this is the world’s weakest growth profile since 2001.
- Global inflation is now expected to peak at 9.5 percent in late 2022, according to the IMF.
- It is expected to remain elevated for longer than previously anticipated, declining to 4.1% only by 2024.
What does this mean for India?
- At first glance, India appears to be in a better position. India’s GDP growth rate is higher, and inflation (7.41% in September 2022) is lower. However, India is only just emerging from the contraction caused by the Covid-19 pandemic in 2020.
- According to the World Bank, the country had the most people (5.6 crore) living in poverty in 2020.
- India faces four major challenges that are impeding her growth trajectory:
- Higher crude oil and fertiliser prices will drive up domestic inflation; a global slowdown will hurt exports, dragging down domestic growth and worsening the trade deficit; a strong dollar will put pressure on the rupee’s exchange rate, reducing its forex reserves and capacity to import goods when times get tough; and o Given the low demand among most Indians, the government may be forced to spend more on providing basic services
