IMF Executive Board Concludes 2022 Article IV Consultation with India
IMF News, December 23, 2022
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- Published: December 23, 2022
Economic rebound and near‑term outlook
- Real GDP grew by 8.7 percent in FY2021/22, bringing total output above pre‑pandemic levels.
- Growth is projected at 6.8 percent in FY2022/23 and 6.1 percent in FY2023/24.
- New COVID cases have fallen to low levels; free administration of booster shots and broader booster eligibility criteria should help improve vaccine coverage.
- Monetary policy accommodation has been gradually withdrawn; the main policy rate has been increased by 190 basis points so far in 2022.
- The current account deficit is expected to increase to 3.5 percent of GDP in FY2022/23 as a result of higher commodity prices and strengthening import demand.
- Inflation is projected at 6.9 percent in FY2022/2023 and is expected to moderate only gradually over the next year.
Risks to the outlook
- Uncertainty is high, with risks tilted to the downside.
- External risks:
- A sharp global growth slowdown would affect India through trade and financial channels.
- Intensifying spillovers from the war in Ukraine can cause disruptions in global food and energy markets.
- Significantly slower growth in China and advanced economies, and reduced international cooperation, can disrupt trade and increase financial market volatility.
- Domestic risks:
- Rising inflation can dampen domestic demand and impact vulnerable groups.
- Upside possibilities:
- Successful implementation of wide‑ranging reforms or greater than expected dividends from advances in digitalization could increase India’s medium‑term growth potential.
Executive Board assessment and policy recommendations
- Fiscal policy
- Directors concurred authorities appropriately responded to post‑pandemic shocks with fiscal measures to support vulnerable groups.
- Directors encouraged a more ambitious and well‑communicated medium‑term fiscal consolidation anchored on stronger revenue mobilization and further improvement in expenditure efficiency.
- High‑quality spending on infrastructure, education and health should be protected.
- Further improvements in public financial management, fiscal institutions and transparency would support consolidation efforts.
- Monetary policy and external sector
- Directors noted front‑loaded monetary tightening to address elevated inflation and recommended additional tightening be carefully calibrated and clearly communicated to balance inflation objectives and impact on activity.
- India’s external position was viewed as broadly in equilibrium; exchange rate should continue to act as a shock absorber with foreign exchange intervention limited to addressing disorderly market conditions.
- Directors welcomed plans to introduce a central bank digital currency.
- Financial sector and macroprudential measures
- While corporate and financial sector balance sheets have improved, Directors encouraged additional measures to counter risks from tightening financial conditions.
- Banks should be encouraged to build additional capital buffers and recognize problem loans.
- Targeted prudential tools could strengthen resilience to rising interest rate risks.
- Directors encouraged further progress on financial sector reforms.
- Structural reforms and inclusion
- Directors commended achievements in digitalization; digital public infrastructure facilitated payments, financial inclusion, and rapid deployment of pandemic support.
- Additional efforts to narrow the digital divide (access and literacy) would support productivity gains.
- Further progress needed on structural reforms: increasing female labor force participation, reducing youth unemployment, and reducing informality.
- Strengthening governance and the regulatory framework would foster transparency and public accountability.
- Directors welcomed new trade agreements and noted additional tariff reduction could deepen integration in global value chains.
- Climate agenda
- Directors noted important progress in increasing the share of renewables and improving energy efficiency.
- Additional efforts would be needed to meet the authorities’ net zero objective.
Key statistics (selected from "India: Selected Economic and Financial Indicators, 2018/19–2023/24")
- Real GDP (at market prices), growth (in percent):
- 2018/19: 6.5
- 2019/20: 3.7
- 2020/21: -6.6
- 2021/22: 8.7
- 2022/23: 6.8 (Projection)
- 2023/24: 6.1 (Projection)
- Consumer prices - Combined (percent change, period average):
- 2018/19: 3.4
- 2019/20: 4.8
- 2020/21: 6.2
- 2021/22: 5.5
- 2022/23: 6.9 (Projection)
- 2023/24: 5.1 (Projection)
- Gross saving (percent of GDP):
- 2018/19: 30.2
- 2019/20: 29.4
- 2020/21: 28.8
- 2021/22: 30.0
- 2022/23: 30.1 (Projection)
- Gross investment (percent of GDP):
- 2018/19: 32.3
- 2019/20: 27.9
- 2020/21: 31.2
- 2021/22: 32.8
- 2022/23: 33.0 (Projection)
- Central government overall balance (percent of GDP):
- 2018/19: -3.9
- 2019/20: -4.8
- 2020/21: -8.6
- 2021/22: -6.7
- 2022/23: -6.5 (Projection)
- 2023/24: -6.2 (Projection)
- General government overall balance (percent of GDP):
- 2018/19: -6.4
- 2019/20: -7.5
- 2020/21: -12.8
- 2021/22: -10.0
- 2022/23: -9.9 (Projection)
- 2023/24: -9.0 (Projection)
- General government debt (percent of GDP):
- 2018/19: 70.4
- 2019/20: 75.1
- 2020/21: 89.2
- 2021/22: 84.2
- 2022/23: 83.5 (Projection)
- 2023/24: 83.9 (Projection)
- Broad money (y/y percent change, end-period):
- 2018/19: 10.5
- 2019/20: 8.9
- 2020/21: 12.2
- 2021/22: 8.8
- 2022/23: 9.0 (Projection)
- Domestic Credit (y/y percent change, end-period):
- 2018/19: 11.8
- 2019/20: 8.3
- 2020/21: 9.5
- 2021/22: 13.6
- 2022/23: 11.4 (Projection)
- Merchandise exports (in billions of U.S. dollars):
- 2018/19: 337.2
- 2019/20: 320.4
- 2020/21: 296.3
- 2021/22: 429.2
- 2022/23: 450.3 (Projection)
- 2023/24: 462.8 (Projection)
- Merchandise imports (in billions of U.S. dollars):
- 2018/19: 517.5
- 2019/20: 477.9
- 2020/21: 398.5
- 2021/22: 618.6
- 2022/23: 737.7 (Projection)
- 2023/24: 769.6 (Projection)
- Current account balance (in billions of U.S. dollars / percent of GDP):
- 2018/19: -57.2 / -2.1
- 2019/20: -24.5 / -0.9
- 2020/21: 24.0 / 0.9
- 2021/22: -38.7 / -1.2
- 2022/23: -118.3 / -3.5 (Projection)
- 2023/24: -109.7 / -2.9 (Projection)
- Gross reserves (in billions of U.S. dollars, end-period):
- 2018/19: 412.9
- 2019/20: 477.8
- 2020/21: 577.0
- 2021/22: 607.3
- 2022/23: 540.5 (Projection)
- 2023/24: 558.3 (Projection)
- External debt (in billions of U.S. dollars, end-period):
- 2018/19: 543.1
- 2019/20: 558.4
- 2020/21: 573.7
- 2021/22: 619.6
- 2022/23: 669.1 (Projection)
- 2023/24: 742.5 (Projection)
- Exchange rate (rupee/U.S. dollar, end-period):
- 2018/19: 69.2
- 2019/20: 75.4
- 2020/21: 73.5
- 2021/22: 75.8
Press Release No. 22/444, IMF Communications Department, December 23, 2022.
