United Nations (The Hawk): With additional monetary tightening, the International Monetary Fund (IMF) anticipates that India's inflation rate, which is now over the Reserve Bank's target of 6.9 percent, will drop to the 4 percent level in the upcoming fiscal year.
"We do think that inflation will come back into the inflation tolerance zone 4% in the fiscal year 2023-2024," said Daniel Leigh, chief of the IMF's World Economic Studies Division, during a news conference on Tuesday. "Additional monetary tightening is going to ensure that that happens."
"Inflation is still over the central bank objective in India at 6.9 percent (that) were expected for this year and falling down to 5.1 percent," IMF Chief Economist Pierre-Olivier Gourinchas stated.
At the presentation of the IMF's World Economic Outlook (WEO) report, he continued, "So, the overall stance of policy within that fiscal and monetary policy should probably be on a tightening side."
The IMF predicts that the global inflation rate will be 8.8% this year and will decline to 6.5% the next year.
Overall, India has been doing okay in 2022, and Gourinchas predicted that growth will remain robust in 2023.
He stated, "We have a growth rate of 6.8% for this year and the prediction is at 6.1% for next year.
He stated that the external outlook, tighter financial conditions, and the growth revision for the first quarter of the fiscal year that came in weaker than anticipated were the main causes of the 0.6% reduction in India's growth rate for the current fiscal year from the 7.4% projection made in July.
India remains the largest economy with the fastest rate of growth in the world notwithstanding the downgrade.
The IMF predicted that the global growth rate will be only 3.2% this year and 2.7% the following.
The recession is on its way, Gourinchas warned, adding that "the worst is yet to come."
We anticipate that a third of the global economy will be experiencing a technical recession, he said.
He linked it to the "stalling" of the world's three main economies, the US, China, and the Euro Area.
According to the WEO, the US economy would only grow by 1.6% in 2022, compared to China's 3.2% and the Eurozone's 3.1%.
The IMF claimed that the high interest rate was a factor in slower US economic development, rising energy costs in Europe, China's Zero Covid policy, where lockdowns are still in place in some places, and the real estate market turmoil.
(Inputs from Agencies)