IMF revises India’s GDP growth forecast to 6.1% for FY24

NEW DELHI: The International Monetary Fund (IMF) on Tuesday slightly upgraded its global growth outlook for this year on Tuesday, attributing it to resilient economic activity in the first quarter. However, the IMF also cautioned about persistent challenges that could dampen the medium-term outlook.

The global lender now projects a 3.0% growth in global real GDP for 2023, which is a 0.2 percentage point increase from its April forecast. The outlook for 2024, however, remains unchanged at 3.0%.

In the case of India, the IMF raised its growth prospects for 2023 to 6.1 percent, a 0.2 percentage point increase from April. This positive revision is due to the momentum gained from stronger-than-expected growth in the fourth quarter of 2022, driven by robust domestic investment.

The IMF's growth prediction is, however, much lower than the RBI's projection of a 6.5% rise.

India's economy experienced a notable acceleration, reaching a growth rate of 6.1% in the March quarter. This upswing was fuelled by increased capital spending from both the government and private sectors. Moreover, for the fiscal year that concluded on March 31, 2022, India's growth stood at an impressive 7.2%, positioning it among the top-performing economies globally.

For the United States, the IMF raised its growth forecast for this year to 1.8 percent, up 0.2 percentage points from April. The increase was attributed to resilient consumption growth in the first quarter, supported by a still-tight labor market, higher real income, and a rebound in vehicle purchases.

Regarding China, the IMF maintained its forecast at 5.2 percent, but highlighted a change in composition due to the underperformance of investment, primarily due to issues in the country's troubled real estate sector.

'World in a better place now'

While acknowledging that the world is currently in a better place, the IMF pointed out challenges that persist. These include high inflation, which erodes household purchasing power, increased interest rates leading to higher borrowing costs, and limited access to credit due to banking strains that emerged in March. The IMF also noted that international trade and manufacturing indicators indicate further weakness, and excess savings accumulated during the pandemic are declining, leaving fewer buffers to withstand future shocks, particularly in advanced economies, such as the United States.

(With inputs from agencies)