The International Monetary Fund (IMF) on Tuesday (July 26) cut India’s economic growth forecast by 80 basis points for the current financial year to 7.4 per cent, from 8.2 per cent estimated in April, mentioning less favourable external conditions and rapid policy tightening by the central bank.

In its latest update of the World Economic Outlook today, the Washington-based international financial institution said though a global recession in 2022 is ruled out with a growth estimate of 3.2 per cent, the balance of risks is exactly to the downside, driven by a wide range of factors that could adversely affect global economic performance.

The IMF said a tentative recovery in 2021 was followed by increasingly gloomy developments in 2022 as risks began to materialise. Global output contracted in the second quarter of this year, owing to downturns in China and Russia. Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide, a worse-than-anticipated slowdown in China, reflecting Covid- 19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine.

The multilateral agency in its World Economic Outlook Update: Gloomy and More Uncertain, said.“…likewise, the outlook for India has been revised down by 0.8 percentage point, to 7.4 per cent. For India, the revision reflects mainly less favourable external conditions and more rapid policy tightening.”

Further, the IMF lowered global growth forecasts, saying global real GDP growth will slow to 3.2 per cent in 2022 from a forecast of 3.6 per cent issued in April, highlighting risks from sky-high inflation and the war in Ukraine were materialising and likely to push the push the global economy into one of the worst slumps if left unchecked.