In its October 2023 World Economic Outlook (WEO) report, the International Monetary Fund (IMF) raised India’s economic growth forecast for the fiscal year 2023-24. The growth projection was increased from 6.1% to 6.3% due to stronger-than-expected consumption during April-June. The report also highlighted India’s resilient domestic economic activity and the positive impact of robust domestic demand, contrasting global economic trends.
IMF World Economic Outlook (WEO) report: Key Points
GDP Growth Projection: The IMF revised India’s GDP growth forecast to 6.3% for both 2023 and 2024, indicating a 0.2 percentage points upward revision for 2023. This adjustment was attributed to the nation’s strong consumption patterns during the specified period.
- Inflation Outlook: The IMF anticipated retail inflation in India to rise to 5.5% in fiscal 2023-24 before easing to 4.6% in 2024-25. This projection aligns with the Reserve Bank of India’s (RBI) inflation target over the medium term.
- RBI’s Projections: The RBI’s projections for the current fiscal year included a consumer price index (CPI)-based inflation rate of 5.4% and a GDP growth rate of 6.5%. The IMF’s report endorsed these projections and emphasized the consistency of monetary policy measures in achieving the RBI’s inflation target.
- Economic Performance: India’s economy exhibited resilience, expanding by 7.8% in April-June, surpassing market expectations. Private consumption played a significant role, growing at a rate of 6.0% compared to 2.8% in the preceding quarter (January-March).
- Global Economic Landscape: The IMF’s report highlighted challenges faced by other major economies, such as China and the euro area. While the United States demonstrated a remarkable recovery, the euro area’s output remained 2.2% below pre-pandemic projections due to factors like the war in Ukraine and spikes in energy prices.
- Global Growth Forecast: Despite the strong performance of the US economy, the overall global growth remained low and uneven. The IMF maintained the global real GDP growth forecast at 3% for 2023 but revised down its 2024 forecast to 2.9% from the previous 3%, citing uncertainties in the international economic landscape.
Current Account Deficit: The IMF anticipated India’s current account deficit to remain at 1.8% of GDP in FY24 and FY25, indicating a stable external economic position for the nation.