IMF raises India's growth forecast again, cites strong consumption

• The growth forecast has been raised from 5.9% in April, 6.1% in July, to 6.3% now.
• IMF has projected India's consumer inflation at 5.5% this fiscal.
• The report says that global inflation is going to decline steadily.

The International Monetary Fund (IMF) has raised India's GDP growth forecast for India for the financial year 2023-24 to 6.3%, its second upward revision since the April report.

According to the latest World Economic Outlook report by the multilateral agency, which was released on Tuesday, the growth is expected to grow by 6.3% this fiscal year, 20 basis points (100 basis points is equal to 1 percentage point) higher than what it had estimated in its previous report.

IMF attributed stronger-than-expected consumption during April-June for the upward projection in the growth estimate.

The growth forecast was raised from 5.9% in April, 6.1% in July, to 6.3% now, taking it closer to the 6.5% predicted by the Indian authorities.

For 2024-25, IMF pegged India's GDP growth at 6.3%, though unchanged from its earlier two projections.

IMF has projected India's consumer inflation at 5.5% this fiscal, against RBI's 5.4% forecast. RBI expects Q2 (Jul-Sep) inflation at 6.4%, Q3 (Oct-Dec) at 5.6% and Q4 (Jan-Mar) at 5.2%. For Q1 (2024-25 fiscal), it is projected at 5.2%.

Overall, the IMF forecast global growth to slow from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024, well below the historical (2000-19) average of 3.8%. Advanced economies are expected to slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024 as monetary policy tightening starts to bite.

Emerging markets and developing economies are projected to have a modest decline in growth from 4.1% in 2022 to 4.0% in both 2023 and 2024.

Global inflation is forecast to decline steadily, from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024, due to tighter monetary policy aided by lower international commodity prices.

"Food security concerns prompted recent export restrictions in India, the world's largest rice exporter. Risks to prices are tilted to the upside, stemming mostly from the ramifications of the end of the Black Sea Grain Initiative and uncertain effects of El Nino (see chapter text), possibly exacerbated by the proliferation of food export restrictions," IMF said.

Core inflation, which is the change in the costs of goods and services barring those from the food and energy basket, is generally projected to decline more gradually, and inflation is not expected to return to the target until 2025 in most cases.

"The global recovery from the Covid-19 pandemic and Russia's invasion of Ukraine remains slow and uneven. Despite economic resilience earlier this year, with a reopening rebound and progress in reducing inflation from last year's peaks, it is too soon to take comfort," IMF said.

"Economic activity still falls short of its pre-pandemic path, especially in emerging market and developing economies, and there are widening divergences among regions. Several forces are holding back the recovery. Some reflect the long-term consequences of the pandemic, the war in Ukraine, and increasing geoeconomic fragmentation. Others are more cyclical in nature, including the effects of monetary policy tightening necessary to reduce inflation, withdrawal of fiscal support amid high debt, and extreme weather events," it added.

(With text input from ANI)