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'India remains a bright spot:' IMF forecasts 6.1% percent growth, drop in inflation

India and China together will account for 50 percent of world growth in 2023

India IMF The IMF has a positive view on India | Reuters

The International Monetary Fund (IMF) on Tuesday projected a growth of 6.1 percent in fiscal year 2023, a slowdown from the current 6.8 per cent. The agency also pegged the global growth to fall to 2.9 percent in 2023.

While the global growth is projected to fall from an estimated 3.4 percent in 2022 to 2.9 percent in 2023, it will rise to 3.1 percent in 2024.

According to the IMF, it was expecting some slowdown in the Indian economy next fiscal year, but it is expected to pick up to 6.8 percent in 2024. "Our growth projections actually for India are unchanged from our October Outlook. We have 6.8 percent growth for this current fiscal year, which runs until March, and then we're expecting some slowdown to 6.1 percent in fiscal year 2023. And that is largely driven by external factors," Pierre-Olivier Gourinchas, Chief Economist and Director, Research Department of the IMF, told reporters here.

The growth will pick up to 6.8 percent in 2024, thanks to the resilient domestic demand despite external headwinds, said the IMF's World Economic Outlook update.

Asia at 5.3 percent

The IMF also forecasts Asia to grow in 2023 and 2024 to 5.3 percent and 5.2 percent, respectively a huge slowdown in 2022. It was 4.3 percent in 2022 due to the slump in China's economy.

Due to the GDP slowdown in the fourth quarter of 2022, China experienced a 0.2 percentage point downgrade for 2022 growth to 3.0 percent -- the first time in more than 40 years.

However, this will rise to 5.2 percent in 2023 due to rapidly improving mobility. However, it is projected to fall to 4.5 percent in 2024 before settling at below 4 percent over the medium term amid declining business dynamism and slow progress on structural reforms. 

"Overall, I want to point out that emerging market economies on the whole and developing economies seem to be already on their way up. We have a slight increase in growth for the region from 3.9 percent in 2022 to 4 percent in 2023," Gourinchas said.

"Another relevant point here is that if we look at both China and India together, they account for about 50 percent of world growth in 2023. So a very significant contribution," he said.

"I want to say, we had a positive view on India in our October forecast. That positive view is largely unchanged," Gourinchas said in response to a question. 

In a blog post he wrote that India remains a bright spot. Together with China, it will account for half of global growth this year, versus just a 10th for the US and euro area combined, he added.


Inflation in India is expected to come down from 6.8 percent in the current fiscal year ending March 31 to 5 percent the next fiscal. It will then drop further to 4 percent in 2024, the IMF has predicted.

"That partly reflects the central bank's actions," Daniel Leigh, Division Chief, Research Department of the IMF told reporters. 

According to the World Economic Outlook update released by the IMF on Tuesday, about 84 percent of countries are expected to have lower headline (consumer price index) inflation in 2023 than in 2022.

Global inflation is set to fall from 8.8 percent in 2022 (annual average) to 6.6 percent in 2023 and 4.3 percent in 2024 -- above pre-pandemic (201719) levels of about 3.5 percent, it said.

"The projected disinflation partly reflects declining international fuel and non-fuel commodity prices due to weaker global demand. It also reflects the cooling effects of monetary policy tightening on underlying (core) inflation, which globally is expected to decline from 6.9 percent in the fourth quarter of 2022 (year over year) to 4.5 percent by the fourth quarter of 2023," the IMF said.

"Still, disinflation will take time: by 2024, projected annual average headline and core inflation will, respectively, still be above pre-pandemic levels in 82 percent and 86 percent of economies," it said.


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