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 percent, amid risks of global stagflation, a senior official of the international organisation said on Tuesday.

Stagflation is defined as a situation of high inflation and stagnant growth.

In April, the International Monetary Fund lowered India's growth projection to 8.2 percent as compared to 9 percent estimated in January. By 2023, the country is expected to grow by 6.9 percent, the IMF projection reported by news agency PTI said.

IMF is currently revising India's growth forecast for 2022, which may be lower than 8.2 percent. This is a work in progress at the moment," IMF Senior Resident Representative in India Luis Breuer said at an interactive session on World Economic Outlook' organised by the MCC here. Despite the growth revision, India is still the fastest growing emerging economy.

He said the country is facing high inflation with low employment, which will not augur well for job opportunities.

Breuer also called for stabilising the debt at higher levels, which was a result of the impact on public finances due to the COVID-19 pandemic, and the need to protect vulnerable sections of society.

India is being seen as an emerging economy, which is recovering at the moment, he said.

The IMF official said central banks across the US and Europe have started to increase interest rates to fight growing inflation caused by a surge in commodity prices and supply disruptions.

"The US Federal Reserve is expected to hike interest rates in the future and the world economy is likely to plateau at 3.6 percent," he said, adding, that the increased cost of borrowing will have an impact on growth rates.

Real interest rates may rise and a hike in US rates will suck in capital from the rest of the world due to high returns," Breuer said.

He also said the pandemic is not over, and the lockdown in Beijing is yet to be withdrawn unlike in Shanghai.

"China, being the factory of the world, the shutdown will disrupt global supplies. There is a risk of China facing a slowdown, which will have a negative impact on India," he said.

A one percent drop in China's GDP growth will reduce India's by 0.6 percent, more than the combined decline of the UK and US together, Breuer said.

Image courtesy: iStock