The IMF earlier had pared its forecast for India’s growth to 5.9% from 6.1% for the current fiscal year, while painting a bleak picture for the world economy battling tightening financing conditions even as the Russia-Ukraine war rages on and the pandemic lingers.
“In India, growth momentum will begin to slow as softening domestic demand offsets strong external
services demand; growth is expected to moderate slightly from 6.8 per cent in 2022 to 5.9 per cent this
year,” it said in a statement.
In January, the multilateral lender had predicted India’s gross domestic product to grow 6.1% in FY24 and 6.8% in FY25. The forecast for FY25 has now been cut by half-a-percentage point to 6.3%.
Despite the cut, India will be the fastest-growing economy over the next two years.
Last week, the World Bank and the Asian Development Bank had reduced India’s growth forecast for FY24 to 6.3% and 6.4%, respectively.The Reserve Bank of India’s Monetary Policy Committee, however, last week lifted its forecast for India’s GDP growth to 6.5% for FY24 compared with 6.4% projected in its February meeting.
Outlook for AsiaPacific
IMF sees a lot of strong dynamism among Asian EMDEs in 2023.
“This will be driven primarily by the recovery in China and resilient growth in India. These two economies alone will account for about half of global growth. Growth in most other economies is expected to bottom out in 2023, in line with other regions,” it said.
IMF noted that the public debt levels in the region have increased significantly compared to before the pandemic.
“Most governments are expected to tighten budgets this year and next. However, the projected consolidation may not be enough to stabilize debt, and rising interest rates would make the burden even heavier,” the IMF’s Krishna Srinivasan and Alasdair Scott wrote.
Calling for the need for alertness owing to recent developments in the global banking sector, the IMF said that the best remedy for financial stress is prevention. The policymakers should keep a close eye
for stresses and develop contingency plans, it said.
“Unless strains in financial markets increase and raise broad-based stability concerns, central banks should separate monetary policy objectives from financial stability goals. To do so, they should use available tools—such as lending and discount facilities—to ease any liquidity constraints in the banking sector, allowing them to continue to tighten policy to address inflationary pressures.”