Even as global economy is yet to be out of the woods, International Monetary Fund (IMF) on Tuesday upped India’s economic growth forecast by 20 basis points to 6.1 per cent for fiscal year 2023-24. The multilateral body expects growth to be 6.3 per cent in Fiscal Year 2024-25.
In April, IMF projected growth rate at 5.9 per cent for FY24 and 6.3 per cent for FY25. With the current growth rate projection, India will continue to be fastest growing economy in the world.
Though this rate is lower than estimates by government and other agencies, still reflect change in stance based on economic activities picking up. “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 (FY23) as a result of stronger domestic investment,” latest update of IMF’s flagship publication World Economic Outlook (WEO).
The current reading endorses optimism of the government. Earlier, Chief Economic Advisor V Anantha Nageswaran had said India to have another solid performance during the current fiscal with risk evenly balanced. The government expects growth rate to be 6.5 per cent. The economy grew by 7.2 per cent in FY23 led by the upward movement in the January-March quarter.
“This upside to the growth estimate takes the momentum deep into the current year,” said the Annual Economic Review, prepared by the Economic Affairs Department of the Finance Ministry. It pointed out that several forecasting agencies share similar optimism as they revise upwards their growth estimates for FY24.
Fitch Ratings raised its forecast for India’s economic growth to 6.3 per cent for the current fiscal year from its previous estimate of 6 per cent. S&P Global Ratings retained its growth estimate for FY24 at 6 per cent and pegged it at 6.9 per cent for FY25. In its recent report, the RBI projected the FY growth at 6.5 per cent.
Global Outlook
Meanwhile, Pierre-Olivier Gourinchas, Economic Counsellor of IMF, said in a blog, titled “Global Economy on Track but Not Yet Out of the Woods,” said the global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine. In the near term, the signs of progress are undeniable. The Covid-19 health crisis is officially over, and supply-chain disruptions have returned to pre-pandemic levels.
Economic activity in the first quarter of the year proved resilient, despite the challenging environment, amid surprisingly strong labor markets. Energy and food prices have come down sharply from their war-induced peaks, allowing global inflation pressures to ease faster than expected. And financial instability following the March banking turmoil remains contained thanks to forceful action by the US and Swiss authorities.
“Yet many challenges still cloud the horizon, and it is too early to celebrate,” he said. Under baseline forecast, growth will slow from last year’s 3.5 per cent to 3 per cent this year and next, a 0.2 percentage points upgrade for 2023 from April projections. Global inflation is projected to decline from 8.7 per cent last year to 6.8 per cent this year, a 0.2 percentage point downward revision, and 5.2 per cent in 2024, he added.