The International Monetary Fund (IMF) has revised its GDP growth projection for India for the financial year 2023-24 to 6.3%, marking the second upward revision since April. In its latest World Economic Outlook report, the IMF cited stronger-than-expected consumption during the April-June period as the driving force behind the increase. This projection is 20 basis points higher than the IMF's previous estimate, which stood at 6.1% in July. India's growth forecast has been consistently increasing, rising from 5.9% in April. The new projection aligns closely with the 6.5% forecast by Indian authorities for the fiscal year.
Inflation and global growth outlook
The IMF estimated India's consumer inflation for the fiscal year at 5.5%, slightly above the Reserve Bank of India's (RBI) forecast of 5.4%. The RBI projects inflation of 6.4% in Q2 (Jul-Sep), 5.6% in Q3 (Oct-Dec), 5.2% in Q4 (Jan-Mar), and 5.2% in Q1 of the 2024-25 fiscal year. Globally, the IMF predicts a slowdown in growth, with global growth expected to drop from 3.5% in 2022 to 3.0% in 2023 and further to 2.9% in 2024, well below the historical average of 3.8% (2000-19). Advanced economies are anticipated to decrease from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024, largely due to monetary policy tightening. Emerging markets and developing economies are projected to have a modest decrease in growth from 4.1% in 2022 to 4.0% in 2023 and 2024.
Global inflation outlook
Global inflation is forecasted to decline steadily, decreasing from 8.7% in 2022 to 6.9% in 2023 and further to 5.8% in 2024. This decline is expected due to tighter monetary policy aided by lower international commodity prices.
Slow and uneven global recovery
The IMF also pointed out the slow and uneven global recovery from the COVID-19 pandemic and the impact of Russia's invasion of Ukraine. Despite signs of economic resilience earlier in the year, challenges remain, and the recovery falls short of pre-pandemic levels. Various factors are contributing to this, including the long-term consequences of the pandemic, the war in Ukraine, geoeconomic fragmentation, monetary policy tightening to reduce inflation, withdrawal of fiscal support amid high debt, and extreme weather events.
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