India to be fastest growing economy at 6.1% despite slowdown: IMF

The International Monetary Fund (IMF) on Tuesday said it is expecting some slowdown in the Indian economy next fiscal year and projected the growth at 6.1 percent as compared to 6.8 per cent during the current fiscal ending March 31. However, it will bounce back in 2024 with 6.8 per cent growth.

Global growth to fall from 3.4% to 2.9%

The IMF on Tuesday released the January update of its World Economic Outlook, according to which the global growth is projected to fall from an estimated 3.4 per cent in 2022 to 2.9 per cent in 2023, then rise to 3.1 per cent in 2024.

“Our growth projections actually for India are unchanged from our October Outlook. We have 6.8 per cent growth for this current fiscal year, which runs until March, and then were expecting some slowdown to 6.1 per cent in fiscal year 2023. And that is largely driven by external factors,” Pierre-Olivier Gourinchas, Chief Economist and Director, Research Department of the IMF told reporters in Washington.

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Growth in India is set to decline from 6.8 per cent in 2022 to 6.1 per cent in 2023 before picking up to 6.8 per cent in 2024, with resilient domestic demand despite external headwinds, said the IMF’s World Economic Outlook update.

China’s growth projected at 5.2%

According to the report, growth in emerging and developing Asia is expected to rise in 2023 and 2024 to 5.3 percent and 5.2 percent, respectively, after the deeper-than-expected slowdown in 2022 to 4.3 percent attributable to China’s economy.

China’s real GDP slowdown in the fourth quarter of 2022 implies a 0.2 percentage point downgrade for 2022 growth to 3.0 per cent — the first time in more than 40 years with China’s growth below the global average. Growth in China is projected to rise to 5.2 per cent in 2023, reflecting rapidly improving mobility, and to fall to 4.5 per cent in 2024 before settling at below 4 per cent over the medium term amid declining business dynamism and slow progress on structural reforms.

“Overall, I want to point out that emerging market economies on the whole and developing economies seem to be already on their way up. We have a slight increase in growth for the region from 3.9 per cent in 2022 to 4 per cent in 2023,” Gourinchas said.

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India, China to power world growth

“Another relevant point here is that if we look at both China and India together, they account for about 50 percent of world growth in 2023. So a very significant contribution,” he said.

“I want to say, we had a positive view on India in our October forecast. That positive view is largely unchanged,” Gourinchas said in response to a question.

In a blog post he wrote that India remains a bright spot. “Together with China, it will account for half of global growth this year, versus just a 10th for the US and euro area combined,” he added.

Slowdown to hit advanced economies more

For advanced economies, the slowdown will be more pronounced, with a decline from 2.7 percent last year to 1.2 percent and 1.4 percent this year and next. Nine out of 10 advanced economies will likely decelerate, Gourinchas said.

The US growth will slow to 1.4 percent in 2023 as Federal Reserve interest-rate hikes work their way through the economy. Euro area conditions are more challenging despite signs of resilience to the energy crisis, a mild winter, and generous fiscal support, he said.

“With the European Central Bank tightening monetary policy, and a negative terms-of-trade shock due to the increase in the price of its imported energy we expect growth to bottom out at 0.7 percent this year,” Gourinchas wrote.

(With inputs from agencies)