IMF slashes India’s growth forecast to 5.9% for FY24

New Delhi, April 11

Tentative signs in early 2023 that the world economy could achieve a soft landing — with inflation coming down and growth steady — have receded amid stubbornly high inflation and recent financial sector turmoil.

The baseline forecast, which assumes that the recent financial sector stresses are contained, is for growth to fall from 3.4% in 2022 to 2.8% in 2023, before rising slowly and settling at 3% five years out, said the IMF in its latest review of the world economy.

It lowered India’s economic growth projection for the current fiscal to 5.9% from 6.1% earlier. That means India will continue to be the fastest-growing economy in the world.

The IMF also lowered the forecast for 2024-25 fiscal to 6.3% from the 6.8% it had predicted in January this year. The slowing of the economy is apparent from the IMF’s projection of 5.9% growth rate in 2023-24 as compared to estimates of 6.8% in 2022-23.

The forecast is lower than the RBI’s projections which has forecast 7% GDP growth in 2022-23 and 6.4% in 2023-24.

“Side effects from the fast rise in policy rates are becoming apparent, as banking sector vulnerabilities have come into focus and fears of contagion have risen across the broader financial sector, including non-banking financial institutions,” warned the IMF Chief Economist Pierre-Olivier Gourinchas following the collapse of SVB Bank and Suisse National.

China will grow by 5.2% in 2023 and 4.5% in 2024 as compared to 3% in 2022.

Slowdown will be pronounced in advanced economies such as the UK which is expected to record negative growth -0.3% this year.

World Economic update

• The International Monetary Fund (IMF) on Tuesday lowered India’s economic growth projection for the current fiscal to 5.9% from 6.1% earlier
• In its annual World Economic Outlook, IMF also lowered the forecast for 2024-25 fiscal (April 2024 to March 2025) to 6.3% from the 6.8% it had predicted in January this year
• IMF growth forecast is lower than projections by the RBI. RBI sees a 7% GDP growth in 2022-23 and a 6.4% in the current fiscal.