IMF Hikes India's GDP Forecast For 2023-24 To 6.3%, Cuts Growth Outlook For China, Euro Area

The latest IMF outlook increased India's GDP forecast for FY24 on strong consumption seen during Q1, and this statistic inched closer to the 6.5 per cent growth rate predicted domestically.

However, the IMF cut it’s growth forecasts for China and the Euro area and noted overall global growth remained weak and uneven, even in the face of the ‘remarkable strength’ of the US economy.

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The International Monetary Fund (IMF) hiked it’s 2023-24 GDP growth forecast for India to 6.3 per cent, making this the second hike in three months. This outlook took India’s GDP growth rate closer to the 6.5 per cent number predicted by the Indian authorities. 

In it’s latest World Economic Outlook report released on Tuesday, the international body said that India’s GDP is projected to grow by 6.3 per cent in the current fiscal year, up by 20 basis points to it’s last forecast in July, reported Moneycontrol. Notably, one basis point is a hundredth of a percentage point. 

The IMF didn’t make any changes to it’s outlook for the next year and maintained a GDP growth rate of 6.3 per cent for India for the fiscal year 2024-25. In it’s report, the body noted, “Growth in India is projected to remain strong, at 6.3 percent in both 2023 and 2024, with an upward revision of 0.2 percentage point for 2023, reflecting stronger-than-expected consumption during April-June.”

However, the IMF cut it’s growth forecasts for China and the Euro area and noted overall global growth remained weak and uneven, even in the face of the ‘remarkable strength’ of the US economy, reported Reuters. 

While the IMF maintained it’s global forecast for real GDP growth in 2023 at 3 per cent, it reduced it’s outlook for the next year by 0.1 percentage point to 2.9 per cent against it’s earlier forecast in July. 

Pierre-Olivier Gourinchas, the IMF’s chief economist, noted that the world economy continued it’s recovery from the COVID-19 pandemic, Russia-Ukraine conflict, and last year’s energy crisis. He stated that growth trends worldwide were becoming more and more divergent and the potential for medium-term growth remained ‘mediocre’. 

Speaking with Reuters in an interview, Gourinchas said, “The global economy is showing resilience. It's not knocked out by the big shocks it's experienced in the last two or three years, but it's not doing too great either. We see a global economy that is limping along and it's not quite sprinting yet.”

However, the IMF hiked it’s growth forecast for the US by 0.3 percentage point to 2.1 per cent in 2023, and increased it’s growth outlook for the next year by 1.5 per cent, on robust business investment and an increase in consumption. This outlook made the US the only major economy to surpass the pre-pandemic forecasts. 

For China, the international body cut it’s growth forecast for 2023 by 0.2 percentage point to 5 per cent and gave a reduced outlook for 2024 by 0.3 percentage point to 4.2 per cent. This reduction was attributed to the country’s real estate crisis and dampened external demand. The IMF also reduced it’s growth projections for the Euro area to 0.7 per cent in 2023, down from it’s earlier forecast of 0.9 per cent, and 1.2 per cent in 2024, down from 1.5 per cent predicted earlier in July.