The International Monetary Fund (IMF) has raised its India’s GDP growth forecast for the current financial year by 20 basis points (bps) to 6.3%, mainly due to “stronger-than-expected” consumption during April-June quarter.
India’s GDP grew 7.8% in the first quarter of FY24, as against 6.1% in January-March. The share of private final consumption expenditure in the country’s GDP in April-June rose to 57.3% from 55.0% in January-March.
A growth rate of 6.3% is in line with the World Bank’s forecast for the year, but 20 bps lower than the Reserve Bank of India’s forecast. For FY24, the IMF has retained India’s GDP forecast at 6.3%.
The multilateral funding agency has kept its global growth forecast for 2023 unchanged at 3.0%. It has raised the United States’ GDP forecast in the current year by 30 bps to 2.1%, but has cut China’s growth projection by 20 bps to 5.0%.
“China’s property sector crisis could deepen, with global spillovers, particularly for commodity exporters,” the IMF said.
For 2024, the agency has projected the global growth rate at 2.9%, 10 bps lower than its previous estimate.
“The global recovery from the COVID-19 pandemic and Russia’s invasion of Ukraine remains slow and uneven. Despite economic resilience earlier this year, with a reopening rebound and progress in reducing inflation from last year’s peaks, it is too soon to take comfort,” the IMF said in its latest World Economic Outlook report.
“Economic activity still falls short of its pre-pandemic path, especially in emerging market and developing economies, and there are widening divergences among regions,” it said.
On price pressures, the IMF has projected global inflation to decline steadily, from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024. For India, the multilateral agency has forecasted CPI inflation to average 5.5% in FY24, which is 10 bps higher than the RBI’s forecast; and for FY25, the forecast stands at 4.6%, as against the RBI’s 4.3% projection.
“…near-term inflation expectations have risen and could contribute—along with tight labor markets––to core inflation pressures persisting and requiring higher policy rates than expected. More climate and geopolitical shocks could cause additional food and energy price spikes,” the IMF said.
The agency noted that central banks across the world need to restore “price stability” while using policy tools to relieve potential financial stress when needed. “Effective monetary policy frameworks and communication are vital for anchoring expectations and minimizing the output costs of disinflation.”
