Statsguru: Six charts explain IMF's warning on the global economy

The latest International Monetary Fund’s (IMF’s) projections suggest a shrinking differential between Indian and global growth.

The IMF has downgraded growth estimates for India from 7.4 per to 6.8 per cent for 2022 in its October World Economic Outlook report. Global growth is expected to be at 3.2 per cent, the same as its July projection. The overall number for emerging and developing economies is slightly better than before (chart 1).

Inflation numbers are worse elsewhere. Indian numbers are higher than the other emerging and developing Asian markets. Europe, Latin America, and the Caribbean are dealing with double-digit inflation (chart 2). 

Fiscal metrics from the IMF show the Indian government’s revenue would be lower than it was before the Covid-19 pandemic took hold. General government revenue for 2022 is seen to be at 19 per cent of the gross domestic product (GDP). It was 19.9 per cent in 2019 (chart 3).

India’s government expenditure is expected to remain elevated. General government expenditure is expected to be at 28.9 per cent of GDP for 2022, according to India numbers from the IMF. It was 27.4 per cent in 2019 (chart 4).

India’s government finances are in worse shape than they were before the pandemic. It is expected to take a few years to come back to pre-pandemic levels on an overall basis, according to IMF numbers (chart 5).

The cost of borrowing is going up for emerging markets and budget constraints are increasingly making their effects felt. The recent debates about “revadi culture” finds an echo in the October IMF Fiscal Monitor, which expects more trade-offs between competing priorities: “Protection of vulnerable populations, and investment for the future.”

It also pointed out that global growth is slowing amid tighter financing conditions (chart 6). A sharp decline would make these decisions that much harder to make. A fair warning for India, amid its relative growth slowdown.