IMF says Indian economy is likely to slow down to 6.1% in 2023 from 6.8% in 2022. representative image
Washington: The International Monetary Fund (IMF) on Tuesday said it is expecting some slowdown in the Indian economy in the next fiscal and projected the growth rate to pick up to 6.1 per cent from 6.8 per cent during the current fiscal ending March 31.
The IMF on Tuesday released its January update of its World Economic Outlook, according to which global growth is projected to fall from an estimated 3.4 percent in 2022 to 2.9 percent in 2023, then rise to 3.1 percent in 2024.
Recession in FY2023 mainly due to external factors: IMF
“Our growth projections for India are actually unchanged from our October outlook. We have growth of 6.8 per cent for this current fiscal year, which runs through March, and then we expect some deceleration to 6.1 per cent in fiscal 2023. And it is largely driven by external factors, Pierre-Olivier Gaurinchas, chief economist and director of the IMF’s research department, told reporters here.
“Growth in India will slow down from 6.8 per cent in 2022 to 6.1 per cent in 2023, before recovering to 6.8 per cent in 2024,” said the IMF’s World Economic Outlook update.
Rise of developing Asian economies
According to the report, growth in emerging and developing Asia is expected to pick up to 5.3 percent and 5.2 percent, respectively, in 2023 and 2024, following an expected 4.3 percent slowdown in 2022 due to China’s economy.
China’s real GDP slowdown in the fourth quarter of 2022 means a 0.2 percentage point drop for 2022 growth to 3.0 percent – with China’s growth below the global average for the first time in more than 40 years. Growth in China is forecast to pick up to 5.2 percent in 2023, reflecting a rapid recovery in mobility, and before slowing to below 4 percent in the medium term amid a decline in business mobility and slow progress on structural reforms. It is estimated to fall to 4.5 percent.
“Overall, I want to point out that emerging market economies and developing economies as a whole are already on their way out. We have projected a modest increase in growth from 3.9 percent in 2022 to 4 percent in 2023,” Gourinchas said.
China, India to account for nearly 50% of world growth in 2023
“Another relevant point here is that if we look at both China and India together, they account for about 50 per cent of world growth in 2023. So it is a very significant contribution,” he said.
Gaurinchas said in response to a question, ‘I want to say that we had a positive outlook on India in our October forecast. That positive outlook remains largely unchanged.
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, compared to just a 10th for the US and the euro zone combined, he said.
Recession will be more pronounced for advanced economies
For advanced economies, the slowdown will be more pronounced, falling from 2.7 percent last year to 1.2 percent and 1.4 percent this year and next. Gorinchas said nine out of 10 advanced economies are likely to decline.
US growth will slow to 1.4 percent in 2023 as the Federal Reserve’s interest rate hikes work their way through the economy. He said the euro area situation is more challenging, despite signs of resilience to the energy crisis, a mild winter and generous fiscal support.
“Combined with a tightening of monetary policy by the European Central Bank and the trade shock with negative terms – due to its increased price of imported energy – we expect growth of 0.7 percent this year,” Gorinchas wrote.
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