Inflation in India expected to come down to 5% in 2023, 4% in 2024: IMF

Global inflation is set to fall from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024 - above pre-pandemic (2017–19) levels of about 3.5%, the International Monetary Fund said

January 31, 2023 08:32 am | Updated 08:32 am IST - Washington

Image used for representational purpose.

Image used for representational purpose. | Photo Credit: Sushil Kumar Verma

Inflation in India is expected to come down from 6.8% in the current fiscal year ending March 31 to 5% the next fiscal, and then drop further to 4% in 2024, the International Monetary Fund (IMF) said on Tuesday.

“Inflation in India as in other countries is expected to come down from 6.8 percent in 2022 to 5 percent in 2023 and then 4 percent coming towards the target in 2024,” Daniel Leigh, Division Chief, Research Department of the IMF told reporters in Washington here.

Also read: IMF retains growth projections for India; economy expected to slowdown to 6.1% in 2023 from 6.8% in 2022

“That partly reflects the central bank's actions,” he added.

According to the World Economic Outlook update released by the IMF on Tuesday, about 84% of countries are expected to have lower headline (consumer price index) inflation in 2023 than in 2022.

Global inflation is set to fall from 8.8% in 2022 (annual average) to 6.6% in 2023 and 4.3% in 2024 - above pre-pandemic (2017–19) levels of about 3.5%, it said.

The projected disinflation partly reflects declining international fuel and non-fuel commodity prices due to weaker global demand. It also reflects the cooling effects of monetary policy tightening on underlying (core) inflation, which globally is expected to decline from 6.9% in the fourth quarter of 2022 (year over year) to 4.5% by the fourth quarter of 2023, the IMF said.

Also read: Inflation accelerates to 7.41%, highest since April

“Still, disinflation will take time: by 2024, projected annual average headline and core inflation will, respectively, still be above pre-pandemic levels in 82 percent and 86 percent of economies,” it said.

In advanced economies, annual average inflation is projected to decline from 7.3% in 2022 to 4.6% in 2023 and 2.6% in 2024 - above target in several cases. In emerging markets and developing economies, projected annual inflation declines from 9.9% in 2022 to 8.1% in 2023 and 5.5% in 2024, above the 4.9% pre-pandemic (2017–19) average, the IMF said.

In low-income developing countries, inflation is projected to moderate from 14.2% in 2022 to 8.6% in 2024 - still high, but close to the pre-pandemic average, it further said.

Also read: Wholesale price inflation declines to 4.95% in December 2022

In a blog post, Pierre-Olivier Gourinchas, Chief Economist and Director, Research Department of the IMF, wrote that global inflation is expected to decline this year but even by 2024, projected average annual headline and core inflation will still be above pre-pandemic levels in more than 80% of countries.

“The inflation news is encouraging, but the battle is far from won. Monetary policy has started to bite, with a slowdown in new home construction in many countries. Yet, inflation-adjusted interest rates remain low or even negative in the euro area and other economies, and there is significant uncertainty about both the speed and effectiveness of monetary tightening in many countries,” Mr. Gourinchas said.

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