IMF expects Indian economy to grow at 6.1% in 2023 vs 6.8% in 2022

The International Monetary Fund (IMF) said that it is expecting some setbacks for the Indian economy next fiscal and pegged the growth rate to 6.1 per cent in 2023, down from 6.8 per cent in 2022. The global financial institution, however, forecast that the growth rate of the Indian economy will go back to 6.8 per cent in 2024, according to its World Economic Outlook. 

IMF Chief Economist and Research Department Director Pierre-Olivier Gourinchas attributed the decline in India’s growth rate during 2023 largely due to external headwinds. 

Gourinchas was quoted as saying by the news agency PTI: “Our growth projections actually for India are unchanged from our October Outlook. We have 6.8 per cent growth for this current fiscal year, which runs until March, and then we’re expecting some slowdown to 6.1 per cent in [the] fiscal year 2023. And that is largely driven by external factors.”

The IMF World Outlook further stated that global growth is projected to fall from around 3.4 per cent in 2022 to 2.9 per cent in 2023 and rise to 3.1 per cent in 2024. The growth in emerging and developing Asia is likely to rise to 5.3 per cent in 2023 and 5.2 per cent in 2024 after the slowdown to 4.3 per cent in 2022 due to China’s uncertain economic conditions. 

Gourinchas further highlighted that India and China will contribute around 50 per cent to global growth in 2023. He said: “Another relevant point here is that if we look at both China and India together, they account for about 50 per cent of world growth in 2023. So, a very significant contribution.”

China’s GDP slowdown in Q4 2022 a 0.2 per cent point downgrade in 2022 growth to 3 per cent- a first in 40 years. China’s growth is likely to rise to 5.2 per cent in 2023 on improving mobility but is expected to fall to 4.5 per cent in 2024 before settling at below 4 per cent amid declining business dynamism and slow progress on structural reforms. 

While India and China are likely to contribute around 50 per cent to the global economic growth, the US’ growth will slow to 1.4 per cent in 2023 due to Federal Reserve’s interest rate hikes to arrest rising inflation. Europe’s growth is likely to bottom out at 0.7 per cent this year due to energy crisis, European Central Bank’s policy rate hikes. 

Besides growth rate, the global financial institution also commented on inflation levels across countries. The IMF stated that inflation in India is expected to come down from 6.8 per cent in the fiscal year ending March 31 to 5 per cent in 2023 and drop to 4 per cent in 2024. 

Daniel Leigh, Division Chief, Research Department of the IMF told the press: “Inflation in India as in other countries is expected to come down from 6.8 per cent in 2022 to 5 per cent in 2023 and then 4 per cent coming towards the target of 2024.” Leigh further said this was due to the Reserve Bank of India’s (RBI) withdrawal of its accommodative stance in a bid to tackle rising inflation levels in the country. 

The World Economic Outlook stated that global inflation is set to fall from 8.8 per cent in 2022 to 6.6 per cent in 2023 and 4.3 per cent in 2024, which is above pre-pandemic levels of nearly 3.5 per cent. 

(With agency inputs)

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