The International Monetary Fund (IMF) has projected that India’s economy will grow by 5.9% for the current fiscal year April 2023 - March 2024, a downward revision of 0.2 percentage points since the January forecast. The IMF estimated a 6.3% economic growth rate for India for the next fiscal year, a downward revision of 0.5 percentage points from the last forecast .
The IMF maintained an optimistic outlook on India, explaining the down revision as an adjustment for historical numbers that were better than expected.
“We realised that 2020-2021 has been actually a lot better than we thought,” IMF economist Daniel Leigh said at a press briefing on Tuesday morning, responding to a question from The Hindu. The growth numbers were released as part of the World Economic Outlook (WEO): A Rocky Recovery report, launched at the start of the World Bank and IMF Spring Meetings here in Washington DC.
“And so actually, there’s less room for catching up,” Mr. Leigh said. For the fiscal year which ended March 31, the IMF had estimated a 6.8% growth rate for India.
“And that pent up demand, from consumption that was informing our previous forecast, is going to be less because they’ve already had more catching up before,” Mr. Leigh said.
“Again, a very strong economy, which is necessary to allow India to continue to converge towards higher living standards and create those jobs that are necessary,” said Mr. Leigh. The Hindu had asked about the outlook for jobs and employment.
Global output growth is projected by the IMF to slow to 2.8% in 2023 (calendar year), picking up to 3% in 2024.
Gradual recovery
“The global economy’s gradual recovery from both the pandemic and Russia’s invasion of Ukraine remains on track,” IMF Chief Economist Pierre-Olivier Gourinchas said, adding that China’s reopened economy was strongly rebounding and supply chain disruptions were unwinding, and negative impacts of the war on food and energy prices were receding.
“At the same time, serious financial stability related downside risks have emerged,” he added.
“Stubbornly high inflation” and recent financial sector turmoil have dimmed prospects of a “soft landing” for the global economy after a period of high inflation and unsteady growth, the IMF report said.
Advanced economies are especially expected to grow slowly. The U.S. was projected to grow at 1.6% and 1.1% this calendar year and next, with the Euro Area growing at a projected 0. 8% and 1.4% for both years respectively. China is projected to grow at 5.2% this calendar year and 4.5% next year.
Although inflation has come down with food and energy prices declining and central banks raising rates, underlying price pressures are sticky and labour markets across a number of economies remains tight, the IMF said.
If the recent financial sector stresses are contained, the IMF projects global growth to settle at 3.0% five years from now — this is the lowest five-year projection in decades.
“The anemic outlook reflects the tight policy stances needed to bring down inflation, the fallout from the recent deterioration in financial conditions, the ongoing war in Ukraine, and growing geo-economic fragmentation,” the WEO said.
The IMF suggested that central banks remain steady with their anti-inflation stance, but also adjust and use their full set of policy instruments. Governments should “aim for an overall tight stance”, the IMF said, while providing targeted support for those impacted most by the cost of living crisis.
