The IMF updates its forecast for India’s GDP growth to 6.1% in 2023

India’s growth rate was anticipated by the IMF on Tuesday to be 6.1% in 2023, which represents an increase of 0.2 percentage points from the April forecast. The International Monetary Fund (IMF) said that this reflects the “momentum” from greater-than-expected growth in the fourth quarter of 2022 as a consequence of increased domestic investment.

“Growth in India is projected at 6.1 percent in 2023, a 0.2 percentage point upward revision compared with the April projection,” it said in its most recent report of the World Economic Outlook.

Global growth is anticipated to slow from an expected 3.5% in 2022 to 3% in both 2023 and 2024, according to the research. Even while the projection for 2023 is somewhat better than what was projected in the World Economic Outlook (WEO) for April 2023, it is still low by historical standards.

The increase in policy rates by central banks to combat inflation continues to have a negative impact on economic growth. According to the report, global headline inflation is predicted to decrease from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024.

It said that projections for inflation in 2024 have been upgraded and that underlying (core) inflation is expected to drop more gradually.

According to the IMF, the recent settlement of the US debt limit crisis and earlier this year’s aggressive government response to US and Swiss banking instability decreased the immediate chances of financial sector unrest.

According to the report, this reduced the risks to the forecast. The balance of risks to global growth is still skewed to the negative, however.

The research warned that further shocks, such as those brought on by the escalation of the conflict in Ukraine and catastrophic weather-related occurrences, might cause inflation to stay high and possibly increase. This would result in tighter monetary policy.

As markets respond to further tightening of central bank policy, financial sector turmoil may return. It warned that unresolved real estate issues might delay China’s economy and have harmful cross-border spillovers.

“The misery caused by sovereign debt may extend to more economies. Positively, inflation may decline more quickly than anticipated, lessening the need for restrictive monetary policy, and domestic demand may once again show more durable, according to the WEO research.

According to the IMF, central banks should continue to make it clear that they are committed to lowering inflation in countries with high and persistent core inflation. Up until there are definite indications that underlying inflation is slowing, a restrictive policy with real rates above neutral is required.

The IMF said that credible medium-term fiscal consolidation is often required to restore budgetary flexibility and maintain debt sustainability since fiscal deficits and government debt have risen beyond pre-pandemic levels.

According to Suman Bannerjee, chief investment officer of the US-based hedge fund Hedonova, “India’s GDP will grow as a result of strong growth in the tech and service sectors, increased foreign investment, favorable demographic dividends, government policy reforms facilitating business, and a predicted recovery in consumer spending post-Covid-19, contributing to a healthier overall economic outlook.”

He said, “I expect it to be 6.3 percent; the forecast of 6.1 percent is pessimistic.” More exports, which decreased the current account deficit and raised remittance revenue from $55.6 billion to $62.3 billion, were encouraged by a weaker currency. In general, reduced oil prices have kept the balance of payments account in control. “Oil prices have been lower due to purchases from Russia and Iran over Norway, the United States, and Saudi Arabia.”