IMF Predicts Resilient Economic Growth for India in FY23

IMF Expects 5.9% Growth in FY23 Despite Turmoil in Financial System

May 2, 2023 - 14:35
May 2, 2023 - 14:36
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IMF Predicts Resilient Economic Growth for India in FY23
IMF Predicts Resilient Economic Growth for India in FY23 | Image Credit: Fortune India

The International Monetary Fund (IMF) has projected that India’s economic growth in the current financial year will remain resilient, despite a 0.2 percentage point downgrade from its January estimate. Along with China, India is expected to power a 4.6% growth in Asia, making it the most dynamic region globally. The IMF expects Asia to contribute around 70% of global growth in 2023, with the rest of the region contributing another 20%. India’s official forecast for FY24 is 6.5% expansion, despite potential downside risks.

Resilient growth in India

The IMF has predicted that India’s economic growth in the current financial year will be resilient despite a 0.2 percentage point downgrade in its growth projection from January, owing to turmoil in the financial system. The IMF forecasts 5.9% growth for India in FY23.

Asia-Pacific to lead global growth

The IMF’s regional economic outlook has stated that together with China, India will power a 4.6% growth in Asia, up from 3.8% in the year before. Asia-Pacific is predicted to be the most dynamic of the world’s major regions in 2023, driven by a buoyant outlook on China and India, with the two economies expected to make up around half of global growth this year.

China’s reopening to provide fresh momentum

The IMF has predicted that China’s reopening will provide fresh momentum to the growth of Asia-Pacific region. China’s economy is expected to expand by 5.2% in 2023 in the wake of a strong recovery in private consumption amid rapid economic reopening.

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Growth momentum to begin to slow in India

While China’s economy is expected to see a strong recovery, the IMF has predicted that growth momentum in India will begin to slow down as softening domestic demand offsets strong external services demand. The growth in India is expected to moderate slightly from 6.8% in the year ended March to 5.9% this year, according to the IMF.

Downside risks to official forecast

India’s official forecast for FY24 is a 6.5% expansion, but the finance ministry has flagged downside risks to the official forecast arising from oil production cuts by OPEC, troubles in the financial sector in developed markets hitting cash flows, and deficient monsoon rains from El Nino which could impact farm output and prices.

Conclusion:

Despite a slight downgrade in the IMF’s growth projection for India, the country’s economic growth is expected to be resilient in the current financial year. Together with China, India is predicted to power growth in Asia, which is expected to be the most dynamic of the world’s major regions in 2023. While growth momentum is expected to begin to slow in India, the official forecast for FY24 is a 6.5% expansion. However, there are downside risks to the official forecast which may impact India’s economic growth in the future.

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