IMF raises India's GDP growth forecast to 6.1%

New Delhi, Jul 26: The International Monetary Fund (IMF) has raised its GDP growth forecast for India for 2023-24 to 6.1 percent from 5.9 percent due to the blowout growth number for January-March. "Growth in India is projected at 6.1 percent in 2023, a 0.2 percentage point upward revision compared with the April projection, reflecting momentum from stronger-than-expected growth in the fourth quarter of 2022 (financial year 2022-23) as a result of stronger domestic investment," the multilateral agency said on July 25 in an update to its World Economic Outlook (WEO) report.

 

 

 

Data released on May 31 showed India's GDP growth for the first quarter of 2023 rose to 6.1 percent, comfortably beating all expectations and forcing the statistics ministry to raise its estimate for growth in 2022-23 by 20 basis points to 7.2 percent. One basis point is one-hundredth of a percentage point.

 

 

 

However, the IMF cautioned that the interest rate hikes announced by central banks to fight inflation continue to weigh on economic activity. The upward revision made by the IMF to India's growth forecast on July 25 reverses its decision from April when it had cut its projection for 2023-24 by 20 basis points to 5.9 percent. Despite the course reversal, the IMF is not as upbeat about India as the government or the Reserve Bank of India (RBI), both of whom see the GDP growing by 6.5 percent in 2023-24. As such, the IMF's expectations are more in line with some private sector economists, who see India's growth slowing down sharply to under 6 percent this year on account of weakening global growth prospects following the rapid tightening of monetary policy by central banks across the world to rein in high inflation.

 

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India's growth story has also got a thumbs-up from the new World Bank President Ajay Banga, who said earlier this month during the meeting of G20 Finance Ministers and Central Bank Governors in Gandhinagar, that he is "more optimistic about India today as a whole than I have been for a long time". The IMF has made no change to its forecast for next year and continues to see India's GDP growing by 6.3 percent in 2024-25.