India’s GDP prediction for FY24 was increased by 20 basis points to 6.1% by the International Monetary Fund (IMF) on Tuesday due to the nation’s faster-than-anticipated economic momentum in the March quarter of FY23.
“Growth in India is projected at 6.1 per cent in 2023, a 0.2 percentage point upward revision compared with the April projection, reflecting momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment,” said by IMF.
In the March quarter of FY23, India’s economic growth climbed by 6.1%, above experts’ predictions as the development in manufacturing and construction came as a pleasant surprise.
The majority of experts predict that the Indian economy would expand by 6% to 6.5 % in FY24. While the Reserve Bank of India projects the economy would grow at a rate of 6.5% in FY24, the Organisation for Economic Co-operation and Development (OECD) raised its growth projection upward to 6% for FY24 last month.
Additionally, the IMF increased its prediction for global economic growth by 20 basis points to 3% for 2023 and increased its growth projections for the US (20 bps) and the UK (70 bps). Britain’s economy is currently not predicted to have a recession in 2023, but Germany is the only other large country that will experience one, with an anticipated 0.3 decline for the year.
“The recent resolution of the US debt ceiling standoff and, earlier this year, strong action by authorities to contain turbulence in US and Swiss banking, reduced the immediate risks of financial sector turmoil. This moderated adverse risks to the outlook. However, the balance of risks to global growth remains tilted to the downside,” said the report.
However, the IMF issued a warning that if new shocks, such as those brought on by an escalation of the conflict in Ukraine and catastrophic weather-related occurrences, more restrictive monetary policy may be implemented and inflation may even increase.
“Financial sector turbulence could resume as markets adjust to further policy tightening by central banks. China’s recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers. Sovereign debt distress could spread to a wider group of economies. On the upside, inflation could fall faster than expected, reducing the need for tight monetary policy, and domestic demand could again prove more resilient,” it said.
The IMF expected the US Federal Reserve to raise interest rates by more than assumed in the April 2023 WEO to a peak of about 5.6 per cent before reducing them in 2024.
The IMF said recovery in the Chinese economy is losing steam following a reopening boost, while keeping its growth for the country projection unchanged at 5.2 per cent for 2023. “Continued weakness in the real estate sector is weighing on investment, foreign demand remains weak, and rising and elevated youth unemployment (at 20.8 percent in May 2023) indicates labor market weakness. High-frequency data through June confirm a softening in momentum into the second quarter of 2023,” it added.
The multilateral lender said world trade growth is expected to decline from 5.2 per cent in 2022 to 2 per cent in 2023, before rising to 3.7 per cent in 2024, well below the 2000–19 average of 4.9 per cent. “The decline in 2023 reflects not only the path of global demand, but also shifts in its composition toward domestic services, lagged effects of US dollar appreciation—which slows trade owing to the widespread invoicing of products in US dollars—and rising trade barriers,” it added.