IMF forecasts 6.3% growth for India's economy this fiscal year
The International Monetary Fund (IMF) predicts India's economy will grow by 6.3% this fiscal year and next, thanks to digital public infrastructure and a robust government infrastructure program. However, this estimate is lower than the 7% forecast by the Reserve Bank of India (RBI). "India has potential for even higher growth, with greater contributions from labor and human capital, if comprehensive reforms are implemented," the agency said.
Inflation expected to gradually decline
"Headline inflation is expected to gradually decline to the target although it remains volatile due to food price shocks," the IMF said. For instance, in November, retail inflation rose to 5.55% from 4.87% the previous month, driven by volatile food prices. While this is within the RBI's acceptable range of 2%-6%, it is still above the 4% target. The IMF believes India could achieve even higher growth with comprehensive reforms.
IMF recommends ambitious fiscal consolidation for India
To reduce public debt, the IMF says India needs "ambitious" fiscal consolidation over the medium term. This includes increasing revenue collection and spending more efficiently on infrastructure and targeted social support. The IMF considers the central bank's current neutral monetary policy stance "appropriate" for bringing inflation back to the 4% target. It also suggests limiting currency intervention to address disorderly market conditions.
