IMF lifts India’s growth forecast for FY24

The International Monetary Fund (IMF) has raised India’s growth outlook for the current fiscal to 6.1%, making it the fastest-growing nation among advanced and emerging economies.

The revised projection reflects a “momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment,” the multilateral lender said in its latest update of the World Economic Outlook (WEO).

The growth is expected to rise further to 6.3 percent in the next fiscal year.

Meanwhile, China’s economy is projected to grow at 5.2% this year and is expected to slow to 4.5% the following year. 

In China, the report said the “consumption growth has evolved broadly in line with April 2023 WEO projections, but investment has underperformed due to the ongoing real estate downturn in that country. Stronger-than-expected net exports have offset some of the investment weakness, although their contribution is declining as the global economy slows.”

Emerging and developing Asia’s growth is predicted to reach 5.3% this year and moderate to 5% next year.

Globally, the growth forecast is projected to decline from an estimated 3.5% in 2022 to 3% in both 2023 and 2024. While the forecast for 2023 is modestly higher than predicted in the April 2023 WEO, it remains weak by historical standards, IMF said. 

The rise in central bank policy rates to fight inflation continues to weigh on economic activity, it added. However, global headline inflation is expected to fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024. 

Inflation is easing in most countries, but it remains high with variations across economies and inflation measures. Energy and food prices have substantially dropped from their 2022 peaks due to factors such as the buildup of gas inventories in Europe and weaker demand in China, although food prices remain elevated.

“Inflation is easing in most countries but remains high, with divergences across economies and inflation measures. Following the buildup of gas inventories in Europe and weaker-than-expected demand in China, energy and food prices have dropped substantially from their 2022 peaks, although food prices remain elevated,” the report said.

Advising central banks worldwide, IMF said they should remain focused on restoring price stability and strengthening financial supervision and risk monitoring. 

“Should market strains materialize, countries should provide liquidity promptly while mitigating the possibility of moral hazard. They should also build fiscal buffers, with the composition of fiscal adjustment ensuring targeted support for the most vulnerable. Improvements to the supply side of the economy would facilitate fiscal consolidation and a smoother decline of inflation toward target levels,” it said.