IMF raises India’s 2023 GDP growth forecast to 6.1%

“Growth in India is projected at 6.1% in 2023, a 0.2 percentage point upward revision compared with the April projection, reflecting momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment,” the IMF said in a report.

However, the IMF kept the growth forecast for 2024 at 6.3%, the growth rate it had predicted in April.

The IMF is not the only international financial agency to review the growth forecast for India.

Earlier in June, Fitch Ratings raised its FY24 (2023-24) growth forecast for the Indian economy to 6.3%, from 6% predicted earlier, citing strong growth in the April-June quarter so far and sustained near-term momentum.

Meanwhile, the Reserve Bank of India (RBI) has projected FY24 Indian economic growth at 6.5%. In terms of quarterly break-ups, the central bank expects 8% growth in the June quarter, followed by 6.5%, 6% and 5.7% in the subsequent quarters, RBI governor Shaktikanta Das said at the end of the Monetary Policy Committee (MPC) meeting last month.

According to the IMF, most advanced economies are expected to see an especially pronounced growth slowdown, from 2.7% in 2022 to 1.3% in 2023.

“Policy tightening by central banks in response to inflation has raised the cost of borrowing, constraining economic activity. Immediate concerns about the health of the banking sector have subsided, but high interest rates are filtering through the financial system, and banks in advanced economies have significantly tightened lending standards, curtailing the supply of credit,” the report said.

“The impact of higher interest rates extends to public finances, especially in poorer countries grappling with elevated debt costs, constraining room for priority investments”. As a result, output losses compared with pre-pandemic forecasts remain large, especially for the world’s poorest nations, it added.

The report said despite headwinds global economic activity remained resilient during Q1 2023, with that resilience driven mainly by the services sector.

“The post-pandemic rotation of consumption back towards services is approaching completion in advanced economies (including in tourism dependent economies of southern Europe), and it accelerated in a number of emerging market and developing economies in the first quarter,” it said.

However, as mobility returns to pre-pandemic levels, the scope for further acceleration appears more limited, it added.

Updated: 25 Jul 2023, 10:17 PM IST