The International Monetary Fund (IMF) has revised its FY24 GDP growth forecast for India upwards by 20 basis points, citing stronger-than-expected growth in the final quarter of FY23. The forecast is now set at 6.1%, reflecting momentum from robust domestic investment. This increase was announced in an update to the IMF’s ‘World Economic Outlook’ (WEO) that was originally released in April.
India’s economic growth surged to 6.1% in the March quarter of FY23, surpassing analysts’ expectations due to robust growth in the manufacturing and construction sectors.
Speaking to the media, Danish Leigh, Division Chief of the Research Department at IMF, stated, “India remains an economy that is growing quite strongly. One sixth of total global growth is accounted for by India this year.” Leigh further noted that inflation in India is projected to stay within the target range of 2-6%. The IMF’s inflation forecast for FY24 is at 4.9%, supported by easing food prices and the proactive measures of the Reserve Bank of India.
In light of India’s recent ban on non-basmati white rice exports, Pierre-Olivier Gourinchas, Chief Economist at the IMF, encouraged the removal of such export restrictions as they tend to increase global food price volatility and could lead to retaliatory measures.
On the global front, the IMF raised its growth outlook for 2023 to 3%, attributing this to upward revisions for the US and UK economies. While the UK economy is not expected to contract, Germany remains the only major economy predicted to face a recession, with an estimated contraction of 0.3% in 2023.
However, the IMF warned of possible persistent inflation due to potential shocks, including intensification of the war in Ukraine and extreme weather events, prompting restrictive monetary policy. The IMF also projected that the US Federal Reserve would raise interest rates to a peak of about 5.6% before a reduction in 2024.
Source: IMF
The report mentioned a slowing recovery in the Chinese economy, with a consistent growth projection of 5.2% for 2023, and an increase in youth unemployment. Global trade growth is expected to slow to 2% in 2023 from 5.2% in 2022, before picking up to 3.7% in 2024, still below the 2000–19 average of 4.9%.
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