India's economy faces significant external headwinds, says IMF

  • 13-Oct-2022
  • India's economy faces significant external headwinds, says IMF


According to the International Monetary Fund, there are significant risks to India's economy from global developments, especially aggressive central bank activities and the effects of the protracted war in Ukraine.

In an interview with Kathleen Hays and Rishaad Salamat on Bloomberg Television, IMF India Mission Chief Nada Choueiri referred to predictions of more policy tightening and the lack of a clear end to the war in Ukraine as "the headwinds affecting India's economy." "We are concerned about these problems."

India's growth prediction for the year ending in March 2023 was downgraded by the Washington-based fund earlier this week by 0.6 percentage points, to 6.8%, making it the largest major economy reduction after the US. According to this forecast, India's inflation will be 6.9% on average this year as rising food prices offset the effects of declining global commodity prices.

“Food price inflation has been a challenge,” Choueiri said, noting that it has complicated the Reserve Bank of India’s job in controlling the headline measure. “More needs to be done to bring it down. We expect inflation to start coming down next year.”

India’s retail inflation accelerated to a five-month high in September, which also marked the third-straight quarter when price gains stayed above the the central bank’s tolerance level of 6%.

“We need to raise rates to contract demand and fight inflation, but you also need to take care of the economy,” Choueiri expressed. “It’s a calibration exercise you have to do to balance growth and inflation objectives at the same time.”

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