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“India’s Growth Story” Continues: IMF upgrades FY24 GDP Growth forecast to 6.1%

IMF Headquarters, Washington D.C., July 26:  The International Monetary Fund (IMF) has increased its GDP growth forecast for India for the financial year 2023-24 to 6.1 percent, up by 20 basis points (0.2 percentage point) from its previous projection of 5.9 percent.

The upward revision was attributed to the exceptional growth numbers recorded in the January-March quarter.

The IMF’s World Economic Outlook (WEO) report, released on July 25, highlighted the boost in India’s economic momentum due to stronger-than-expected growth in the fourth quarter of the previous financial year (2022-23).

The multilateral agency acknowledged this outcome as a result of robust domestic investment.

Data released on May 31 showed that India’s GDP for the first quarter of 2023 had surged to 6.1 percent, surpassing expectations. Consequently, the statistics ministry revised its estimate for growth in 2022-23 to 7.2 percent.

It’s worth noting that the IMF’s upward revision in July marks a reversal from its earlier decision in April when it had lowered its projection for India’s GDP growth in 2023-24 to 5.9 percent.

However, the IMF’s outlook remains more cautious compared to the projections of the Indian government and the Reserve Bank of India (RBI), both of which foresee GDP growth at 6.5 percent for the same period.

The IMF’s forecast for the subsequent year (2024-25) remains unchanged at 6.3 percent GDP growth for India.


Global Projections

The IMF’s new view on the global economy has led to an upward revision in its growth forecast for 2023, now projected at 3 percent, up from the 2.8 percent forecast in April.

Despite this positive adjustment, the IMF cautioned that economic activity may still be affected by the ongoing interest rate hikes by central banks to tackle inflation.

The agency emphasized that inflation remains high, affecting household purchasing power, and the tightening of monetary policy has increased borrowing costs, constraining economic activity.

Although immediate concerns about the banking sector have eased, high-interest rates continue to impact the supply of credit as banks in advanced economies tighten lending standards.

While the IMF foresees faster growth for the US in 2023 than previously expected (1.8 percent), it slightly reduced its forecast for 2024 to 1 percent.

The Euro area saw a modest increase in its growth forecast for both 2023 and 2024, while China’s growth projection remained stable at 5.2 percent for 2023 and 4.5 percent for 2024.


Global Concerns

The IMF highlighted that most economies’ priority should be achieving sustained disinflation.

It advised central banks in economies with elevated and persistent core inflation to clearly communicate their commitment to reducing inflation.

The IMF expects global headline inflation to gradually decline from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. Core inflation is also projected to decrease from 6.5 percent in 2022 to 6 percent in 2023 and 4.7 percent in 2024.

In conclusion, the IMF’s upward revision in India’s GDP growth forecast to 6.1 percent for 2023-24 reflects the nation’s strong economic momentum, driven by robust domestic investment.

However, the IMF remains cautious, expressing concerns about global economic growth amid ongoing inflation-fighting measures taken by central banks.

(Report based on inputs from different news agencies)

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