IMF cuts India’s growth forecast
#GS-03 External Sector
- The International Monetary Fund (IMF) is an intergovernmental organization which has 190 member countries.
- The idea of the creation of IMF was conceptualised in 1944 at the Bretton Woods Conference.
- IMF came into operation on 27th December 1945.
Mission of IMF:
- furthering international monetary cooperation,
- encouraging the expansion of trade and economic growth, and
- discouraging policies that would harm prosperity.
IMF helps countries going through a foreign currency shortage by giving them long term loans with low interest rates.
- Special Drawing Rights (SDR) is an international reserve asset created by the IMF.
- SDR basket contains US dollar, euro, Japanese yen, and British pound sterling and Chinese Renminbi as standard currencies.
- The two criteria to be included in SDR basket are the export criterion and the freely usable criterion.
- A currency meets the export criterion if its issuer is an IMF member or a monetary union that includes IMF members and is also one of the top five world exporters.
- For a currency to be determined “freely usable” by the IMF, it has to be widely used to make payments for international transactions and widely traded in the principal exchange markets.
Why IMF cut India’s growth forecast:
IMF has forecasted lower growth rates across the globe since:
- the impact of the Russia-Ukraine war,
- tightening monetary conditions globally,
- the highest inflation in decades, and
- lingering effects of the pandemic.
Projections of IMF
- India is projected to grow at 6.8% in the current fiscal year, following 8.7% growth in fiscal year that ended March 31 as per figures released in the IMF’s October 2022 World Economic Outlook.
- The IMF has also projected 6.9% consumer price inflation this year and 5.1% next year.
- For the world as a whole, growth will slow down from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023.