IMF Raises India’s FY24 Growth Forecast to 6.3% From 6.1%

The International Monetary Fund (IMF) in its latest World Economic Outlook report for October, released today during the ongoing IMF Annual Meetings in Marrakech, Morocco has raised India's growth projection for the current financial year on the back of a stronger-than-expected consumption during April-June quarter.

'Growth in India is projected to remain strong, at 6.3% in both 2023 and 2024, with an upward revision of 0.2 percentage point for 2023, reflecting stronger-than-expected consumption during April-June,' said the IMF in its report.

This is the second time the IMF has raised its GDP forecast for India in the last three months. The raised forecast is now closer to the RBI's FY24 GDP forecast of 6.5%.

Over the medium term, the IMF has forecasted a 6.3% GDP growth for India by FY29. India's consumer price index (CPI) inflation is seen easing from 6.7% in 2022 to 5.5% in 2023 and 4.6% in 2024, the IMF said.

The IMF expects world economic growth to slow from 3.5% in 2022 to 3% this year and 2.9% next year, a 0.1 percentage point downgrade for 2024 from its estimates released in July.

'The strongest recovery among major economies has been in the United States, where GDP in 2023 is estimated to exceed its pre-pandemic path. The euro area has recovered, though less strongly-with output still 2.2% below pre-COVID projections, reflecting greater exposure to the war in Ukraine and the associated adverse terms-of-trade shock, as well as a spike in imported energy prices,' the IMF report noted.

Growth is expected to see a modest decline for Emerging markets and developing economies from 4.1% in 2022 to 4% in both 2023 and 2024, with a downward revision of 0.1 percentage point in 2024, reflecting the property sector crisis in China, the fund said in its report.

'Forecasts for global growth over the medium term, at 3.1%, are at their lowest in decades, and prospects for countries to catch up to higher living standards are weak,' added the IMF in its report.

Global inflation is forecast to decline steadily, from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024. Forecasts for 2023 and 2024 are revised up by 0.1 percentage point and 0.6 percentage point, respectively, and inflation is not expected to return to target until 2025 in most cases.

With many countries near the peak of their tightening cycles, little additional tightening is warranted, IMF said in its report. The IMF also warned that easing prematurely would blow the gains of the last 18 months.

The IMF suggests that higher long-term growth can be achieved through structural reforms, especially related to governance, business regulations and the external sector. Multilateral cooperation is encouraged to promote better growth outcomes and global financial stability, with the IMF playing a crucial role.