The IMF is in the process of revising India’s growth projection for 2022, which could be lower than its earlier forecast of 8.2 per cent, amid risks of global stagflation.

“The Fund is currently revising this and we will probably see slightly lower projections for this year because of some slowdown due to Omicron and because of spillovers from the Ukraine war,” said Luis Breuer, senior resident representative, IMF India and Bhutan.

The IMF in its April 2022 World Economic Outlook had projected an 8.2 per cent growth of the Indian economy, sliding down from 8.9 per cent in 2021. The projection for 2023 is at 6.9 per cent.

Breuer, who was speaking at a session organised by the Merchants Chamber of Commerce and Industry on Tuesday, central banks, particularly in the advanced economies, have started increasing interest rates leading to a rise in the cost of borrowing.

There is the anticipation of further rate hikes in the US and Europe amid ballooning inflation.

A slowdown of the Chinese economy has also raised the risk for the global economy. The global economic growth is projected by IMF at 3.6 per cent in 2022.

Breuer said when China's growth falls by 1 per cent, growth in Asia falls by 0.6 per cent.

When the US growth falls by 1 per cent, Asian growth falls by 0.3 per cent.

“Having a slowdown in China combined with a slowdown in Europe and US is kind of an unsavoury cocktail.”

“Combined with that there is a higher interest rate and higher inflation. So, it is a rough time for the global economy,” said Breuer.

The Reserve Bank of India is anticipated to further increase policy rates to tackle inflation. There is also concern over the challenges of debt service obligations as global rates go upwards. India's total external debt as of December 2021 was $614.9 billion, higher than $568.3 billion in December 2020..

He also said the pandemic is not over, and the lockdown in Beijing is yet to be withdrawn unlike in Shanghai.