• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

The Curious Case Of Indian Economic Recovery

For India, the revision reflects mainly less favourable external conditions and more rapid policy tightening. Elsewhere, growth revisions in the baseline have been mostly on the upside, IMF says

Photo Credit : Stock


In a major setback to Prime Minister Narendra Modi-led central government, the International Monetary Fund (IMF) has sharply slashed its growth forecast for the fiscal year 2023 to 7.4 per cent from 8.2 per cent it had estimated in April.

For emerging market and developing economies, the negative revisions to growth in 2022–23 reflect mainly the sharp slowdown of China’s economy and the moderation in India’s economic growth, IMF said in its World Economic Outlook update titled ‘Gloomy and More Uncertain. 

For India, the revision reflects mainly less favourable external conditions and more rapid policy tightening. Elsewhere, growth revisions in the baseline have been mostly on the upside, the global body said. 

Soon after the news came out, Kaushik Basu, former Chief Economist, World Bank took to Twitter and wrote, "IMF's just-released World Economic Outlook estimates that from 2021 to 2023 India's growth rate each year will be less than the previous. This resembles what happened after 2016 and did deep damage to the economy. It's important to take corrective action, not live in data denial."

He added that over 3 years, India's annual growth is 2.9 per cent, behind China (4.5 per cent) and the low-income country average (3.1 per cent). This is not where India was; its economy has enough strength. This is the price of divisive politics & erosion of trust.

"Since I track exchange rates closely I can say, though India’s economy is not doing well, RBI is doing a very good job managing the exchange rate," Basu said. 

The IMF has also downgraded growth projections for several other emerging and advanced economies amid the re-emergence of Covid-19 and slow vaccination progress.

Talking about the global domestic product (GDP) estimate for 2023, the IMF also slashed it to 3.2 per cent, four-tenths of a point lower than the April forecast, and about half the rate seen last year.

Meanwhile, one side where the BJP government claims economic recovery, IMF rankings, adds worries as far as the recovery is concerned. However, this is not the first time the global body has contradicted the ruling party's claims. 

Based on the IMF data, India is now predicted to become a USD 5 trillion economy by FY27. The IMF had in its April World Economic Outlook database forecast FY29 as the target date but later corrected it and advanced it to FY27.

Union Minister of State for Finance Pankaj Chaudhary in a written reply to a question in Lok Sabha said that as per provisional estimates released by National Statistical Office (NSO) the Indian economy in 2021-22 has fully recovered the pre-pandemic real GDP level of 2019-20. 

The real GDP growth in 2021-22 stands at 8.7 per cent, 1.5 per cent higher than the real GDP of 2019-20, he said. 

He also mentioned how international agencies, for FY 2022-23 and FY 2023-24, have revised downward the growth projections due to the recent global crisis. 

"The revised growth for India is still higher than that of major advanced and emerging market economies," the minister stated.

MoS Chaudhary said that the central government reduced the central excise duty on petrol and diesel by Rs 8 and Rs 6 per litre respectively effective from May 2022 to give a further fillip to the economy and boost consumption and keep inflation low, thus helping the poor and middle-income classes.

The government's recent initiatives such as an increase in customs duty on gold imports from 10.75 per cent to 15 per cent, imposition of a cess of Rs. 17,000 per tonne on domestic crude and SAED and cess on exports of diesel and aviation turbine fuel shipments at the rate of Rs 11 per litre and Rs 4 per litre, are likely to have a positive impact on government's tax collections, he said. 

The minister added that goods and services tax (GST) collections in the first quarter of 2022-23 registered a growth of 36.4 per cent compared to the corresponding period of the previous year.

The Ministry of Finance on Monday said that it has collected a gross GST revenue of Rs 1,48,995 crore in July 2022 which is the second highest revenue since the introduction of GST.

The ministry said that out of Rs 1,48,995, the central GST is Rs 25,751 crore, state GST is Rs 32,807 crore and integrated GST is Rs 79,518 crore. 

The integrated GST includes Rs 41,420 crore collected on import of goods) and cess is Rs 10,920 crore (including Rs 995 crore collected on import of goods), it said.

Also, Kotak Mahindra Bank in its report 'Economy: Fiscal On Fine Balance' mentioned that the centre’s fiscal remains on the edge given the uncertainties arising from both the revenue and expenditure fronts. 

In the absence of any expenditure rationalisation, the centre's fiscals are likely to remain under pressure with risks of higher borrowings, it said. 

Given the uncertainty on the evolution of export duty and windfall tax as well as expenditure rationalisation, the FY2023E GDP will likely be within 6.4-6.8 per cent, it added. 

Meanwhile, the Reserve Bank of India retained its GDP growth forecast at 7.2 per cent for the current fiscal along with a warning against negative spillovers of geopolitical crisis and a slowdown in the global economy.

Tags assigned to this article:
indian economy economic recovery