IMF Revises India’s Growth Projection To 6.3%
Earlier this month, the World Bank maintained its growth projection for the current fiscal at 6.3 per cent due to positive trends in investment and consumption
Amid the Israel-Hamas war, the International Monetary Fund (IMF) has increased India’s economic growth forecast by 20 basis points to 6.3 per cent for the fiscal year 2023-24 (FY24). This upward revision is attributed to improved consumption demand. However, there is no alteration in the projection for FY25, which remains at 6.3 per cent.
The Indian economy exhibited a growth of 7.2 per cent in FY23. The IMF, in its annual publication ‘World Economic Outlook’ (WEO) stated, “Growth in India is projected to remain strong, at 6.3 per cent in both 2023 and 2024, with an upward revision of 0.2 per cent for 2023, reflecting stronger-than-expected consumption during April-June.”
In its previous projection in April, the IMF estimated a growth rate of 5.9 per cent, which was revised to 6.1 per cent in July due to robust growth of 7.8 per cent in the April to June quarter.
Earlier this month, the World Bank maintained its growth projection for the current fiscal at 6.3 per cent due to positive trends in investment and consumption.
Notably, both the IMF and World Bank projections are lower than the estimates of the Modi government and the Reserve Bank of India (RBI), which have pegged India’s GDP growth at 6.5 per cent.
While projections from the Organisation for Economic Cooperation and Development (OECD), Fitch Ratings and ADB align with the government’s estimates, they are higher than S&P Global Ratings’ forecast of 6 per cent.
India holds a share of 7.3 per cent in the World Economy and 12.5 per cent in emerging markets and developing economies.
World Outlook
Regarding the global economy, the WEO has reduced growth projections for 2023 and 2024. Pierre-Olivier Gourinchas, Economic Counselor and Director of the Research Department noted, “According to our latest projections, world economic growth will slow from 3.5 per cent in 2022 to 3 per cent this year and 2.9 per cent next year, a 0.1 per cent downgrade for 2024 from July. This remains well below the historical average.”
He added that the global economy is still recovering from the pandemic, Russia’s invasion of Ukraine, and the cost-of-living crisis. Despite disruptions in energy and food markets, as well as substantial monetary tightening to combat high inflation, economic activity has not stalled, but growth remains slow and uneven.
Inflation Concerns
Regarding overall price trends, the statement mentioned that a deceleration in headline inflation from 9.2 per cent in 2022 to 5.9 per cent this year and 4.8 per cent in 2024. Core inflation, excluding food and energy prices, is also expected to decrease, albeit more gradually, to 4.5 per cent next year. Most countries are unlikely to return to their inflation targets until 2025.
While some of the extreme risks have moderated, such as severe banking instability, the balance remains tilted to the downside. The report particularly highlighted concerns about China’s real estate crisis and the potential impact on financial stability.
