How IMF and Nomura projected India’s GDP Growth

By: Lakshita Bhagat

As per Nomura, the growth projection for 2022 is 7.2% because economic activity has resumed across sectors, even in sectors that had remained completely shut during the pandemic such as hotels and travel

After the economic lull during the Covid-19 crisis years, economic activities have picked up in India, especially in the wake of the ongoing festive season. As a fast-developing country, India’s growth rate is above the advanced economies. The Indian government has set the target for annual GDP growth to be over 7% for sustained growth. Recently, growth projections were released by various institutions, which have all lowered India’s GDP growth. However, different agencies have put out different numbers. The case in point is the U.S.-based International Monetary Fund (IMF) and Japan-based brokerage firm Nomura.

A look at the table below highlights the contrast between the forecasts of two entities pertaining to India, which is starker for 2023. The GDP forecast for 2022 and 2023 is 6.8% and 6.1% by the IMF and 7.2% and 4.7% by Nomura. According to IMF projections, the lowering of India’s growth forecast for the next year is not too drastic. The country is poised to lead in terms of its GDP growth despite the slashed growth forecast. However, despite projecting a 7.2% growth in GDP for 2022, Nomura has sharply cut the projected growth to 4.7% from the earlier 5.4%. 

Table. GDP, Annual Percentage Change, IMF and Nomura (Projection)

Source: IMF-World Economic Outlook; Nomura

Some major reasons that have led the agencies to moderate GDP growth forecasts pertain to fear of looming recession in major economies such as the US, Europe, and China. The global economy has been badly hit by the Covid-19 pandemic and by the ongoing Russia-Ukraine crisis, which has led to an increase in energy and food prices. Further, banks are tightening monetary policy to contain inflation in India and elsewhere.

As per Nomura, the growth projection for 2022 is 7.2% because economic activity has resumed across sectors, even in sectors that had remained completely shut during the pandemic such as hotels and travel. However, the projected global recession will impact India’s growth in the following year because of the slowing down of exports and the impact of inflation on consumers.

While IMF and Nomura both have linked the slashing of growth projection to the contraction of the global economy and inflationary pressures, the difference in their forecast figures might be due to their methodologies. However, what remains certain is that India should not just focus on the present growth scenario but think about its medium-term growth and how to tackle the inflationary pressures that could dampen consumption and hit demand.