IMF raises India FY24 GDP forecast to 6.3% on strong domestic consumption

India had retained its tag as the fastest-growing major economy, as GDP rose by 7.8 per cent, driven largely by robust growth in the services sector, strong consumption and a favourable base.

The International Monetary Fund (IMF), on Tuesday, upgraded its GDP forecast for India for the current financial year (FY24) to 6.3 per cent from 6.1 per cent, citing stronger-than-expected domestic demand.

In the October update of its World Economic Outlook (WEO), the IMF kept its global growth projection for calendar year 2023 at 3 per cent, unchanged from the July update. It raised the GDP projections for United States and Japan, but slashed forecasts for the European Union, China, Canada, Italy, Germany, Saudi Arabia and others.

“Growth in India is projected to remain strong, at 6.3 per cent in both FY24 and FY25, with an upward revision of 0.2 percentage points for FY24, reflecting stronger-than-expected consumption during April-June,” the WEO October update stated, for the April-June FY24 quarter.

India had retained its tag as the fastest growing major economy, as GDP rose by 7.8 per cent, driven largely by robust growth in the services sector, strong consumption and favourable base.

The latest IMF GDP forecasts for India are close to the Reserve Bank of India and Finance Ministry’s own estimates of 6.5 per cent.

The IMF said in its WEO October update that the global economy continues to recover slowly from the blows of the pandemic, Russia’s invasion of Ukraine, and the cost-of-living crisis. The report was drafted before the latest geo-political flashpoint between Israel and Hamas.

“Despite the disruption in energy and food markets caused by the war, and the unprecedented tightening of global monetary conditions to combat decades-high inflation, the global economy has slowed, but not stalled. Yet growth remains slow and uneven, with growing global divergences. The global economy is limping along, not sprinting,” said Pierre-Olivier Gourinchas, economic counsellor at IMF.

“According to our latest projections, global growth will slow from 3.5 per cent in 2022 to 3 per cent this year and 2.9 per cent next year, a 0.1 percentage point downgrade for 2024 from our July projections. This remains well below the historical average,” Gourinchas said.

He said that global headline inflation also continues to decelerate, from 9.2 per cent in 2022, on a year-over-year basis, to 5.9 per cent this year and 4.8 per cent in 2024. Core inflation, excluding food and energy prices, is also projected to decline, albeit more gradually than headline inflation, to 4.5 per cent in 2024.

“The slowdown is more pronounced in advanced economies than in emerging market and developing ones. Within advanced economies, the US surprised on the upside, with resilient consumption and investment, while euro area activity was revised downward,” he said, adding that many emerging market economies proved quite resilient and surprised on the upside, with the notable exception of China, facing growing headwinds from its real estate crisis and weakening confidence.