The International Monetary Fund (IMF) has warned of a hard landing for the world economy if inflation persists even as it trimmed the growth forecast for India to 5.9 per cent in the current fiscal.

The IMF on Tuesday downgraded its outlook for global economic growth: it envisions growth this year at 2.8 per cent down from 3.4 per cent in 2022 and from the 2.9 per cent estimate for 2023 it made in its previous forecast in January.

The IMF lowered India’s economic growth projection for the current fiscal to 5.9 per cent from 6.1 per cent earlier.

The IMF forecast is lower than the World Bank’s recent forecast of 6.3 per cent and RBI’s 6.5 per cent. The World Bank had cut its forecast from its December estimate of 6.6 per cent. The RBI had, however, raised its GDP growth projection to 6.5 per cent last week from 6.4 per cent earlier.

The outlook for the world economy this year has dimmed in the face of chronically high inflation, rising interest rates and uncertainties resulting from the collapse of two big American banks.

The fund said the possibility of a “hard landing,” in which rising interest rates weaken growth so much as to cause a recession, has “risen sharply,” especially in the world’s wealthiest countries.

“The situation remains fragile,’’ Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters on Tuesday.

In its annual World Economic Outlook, IMF also lowered its India growth forecast for 2024-25 fiscal (April 2024 to March 2025) to 6.3 per cent from 6.8 per cent it had predicted in January this year.

The growth rate of 5.9 per cent in the 2023-24 fiscal compares with an estimated 6.8 per cent growth in the previous year.

“The Indian economy continues to perform well and remains the fastest growing Asian economy, and one of the fastest growing in the world,” Anne-Marie Gulde-Wolf, deputy-director for Asia and Pacific Department, IMF, said.

“However, we have revised our projections to incorporate recent data, which were released earlier this year. Based on this information, we now project that growth in FY 2023-24 will be 5.9 per cent, only slightly lower than our previous projection of 6.1 per cent in the January WEO, on the back of an expected slowdown in consumption growth,” she said.

“Indeed, we have seen evidence of this deceleration in consumption growth in the data for CY 2022:Q4, as the large so-called ‘revenge consumption’ boom earlier in the year subsided,” Gulde-Wolf said in response to a question.

The IMF is forecasting 7 per cent global inflation this year, down from 8.7 per cent in 2022 but up from its January forecast of 6.6 per cent for 2023.

“Inflation is much stickier than anticipated even a few months ago,’’ Gourinchas wrote in the IMF’s latest World Economic Outlook.

Persistently high inflation is expected to force central banks to keep raising rates and to keep them at or near a peak longer to combat surging prices.

Reckoner

■ World economic growth projected lower at 2.8 per cent

■ World growth impacted by high inflation, interest hikes by the West and recent bank failures

■ IMF fears rising interest rates may induce global recession

■ IMF projections for India lower than that of World Bank and RBI