IMF raises forecast for India’s GDP growth in 2023 to 6.1%, keeps China at 5.2%

The International Monetary Fund (IMF) has raised its forecast for the growth rate of India’s economy to 6.1 per cent in 2023 which is 0.2 percentage points higher than its April projection.

The upward revision has been made because of the stronger-than-expected growth in the fourth quarter of 2022 triggered by higher domestic investment.

The IMF has left its forecast for China unchanged at 5.2 per cent for 2023 and 4.5 per cent for 2024. While consumption growth has evolved broadly in line with April 2023 World Economic Outlook projections,  investment has underperformed due to the ongoing real estate downturn in China, the report said.

The IMF said in its latest update of the World Economic Outlook that growth in emerging and developing Asia is on track to rise to 5.3 per cent in 2023, then to 5.0 percent in 2024, showcasing a 0.1 percentage point downward revision for 2024.

“Growth in India is projected at 6.1 percent 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,” IMF’s World Economic Outlook Update said.

However, the Reserve Bank of India has projected Indian economic growth rate for 2023-24 at 6.5%.

Earlier in June, Fitch Ratings raised its FY24 (2023-24) growth forecast for the Indian economy to 6.3%, from 6% predicted earlier, citing strong growth in the April-June quarter so far and sustained near-term momentum.

According to the IMF prediction, growth in Japan is projected to witness an increase from 1.1 per cent in 2022 to 1.4 per cent in 2023, showcasing a modest upward revision then slow to 1.0 per cent in 2024 as the effects of past stimuli dissipate.

The IMF said that global growth is projected to fall from an estimated 3.5 per cent in 2022 to 3.0 per cent in both 2023 and 2024. It further said that global headline inflation is expected to fall from 8.7 per cent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024.

“While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook (WEO), it remains weak by historical standards. The rise in central bank policy rates to fight inflation continues to weigh on economic activity,” the update said.

“Global headline inflation is expected to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. Underlying (core) inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward,” it said.

The IMF said that the inflation could remain high and even rise if further shocks occur, including those from an intensification of the conflict in Ukraine and extreme weather-related events, resulting in more restrictive monetary policy. It said financial sector turbulence could resume as markets adjust to further policy tightening by central banks.

In the United States, growth is projected to slow from 2.1 per cent in 2022 to 1.8 per cent in 2023, the World Economic Outlook Update said.