“Growth in India is set to decline from 6.8% in 2022 to 6.1% in 2023 before picking up to 6.8% in 2024, with resilient domestic demand despite external headwinds,” the IMF said in its World Economic Outlook Update of January 2023.
In October, the Fund said that the strong recovery in South Asia is expected to take a breather, with India’s economy expanding at 6.8% in FY23, revised down by 1.4 percentage points since the April 2022 World Economic Outlook.
The IMF expects global growth to rise to 3.1% in 2024.
“India remains a bright spot. Together with China, it will account for half of global growth this year, versus just a tenth for the US and euro area combined,” said Pierre-Olivier Gourinchas, Economic Counsellor and the Director of Research of the IMF.
The Reserve Bank of India has also forecast 6.8% growth in FY23 while the World Bank has pegged it at 6.9%. Nominal gross domestic product (GDP) growth, without adjusting for inflation, is seen at 15.4% in FY23, sharply higher than the 11.1% assumed in the budget.
India’s GDP had grown 8.7% in FY22, boosted by the pandemic-induced low base of the preceding FY21 fiscal year.For emerging market and developing economies, the growth is projected to rise modestly to 4% in 2023 and 4.2% in 2024, from 3.9% in 2022, with an upward revision of 0.3 percentage point for 2023 and a downward revision of 0.1 percentage point for 2024.
About half of emerging market and developing economies have lower growth in 2023 than in 2022, according to the IMF.
As per the report, global inflation is expected to decline this year but even by 2024, projected average annual headline and core inflation will still be above pre-pandemic levels in more than 80% of countries.
“The rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity,” the IMF said, adding that the rapid spread of Covid-19 in China dampened growth in 2022, but the recent reopening has paved the way for a faster-than-expected recovery.
Global inflation is expected to fall to 6.6% in 2023 from 8.8% in 2022. IMF expects it at 4.3% in 2024, still above pre-pandemic (2017–19) levels of about 3.5%.
The IMF cautioned that severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate, and tighter global financing conditions could worsen debt distress, and financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical fragmentation could hamper economic progress.