Indian economy 'very strong,' will grow at 5.9%: IMF chief
The International Monetary Fund (IMF) on Tuesday slashed the growth projection for India from 6.1% to 5.9% for the financial year 2023-24. However, Daniel Leigh, the division's World Economic Studies chief, praised India, calling it one of the bright spots in the current global economy. The IMF has also forecast 6.3% growth for India in the fiscal year 2024-25.
Why does this story matter?
The IMF reposed faith in the Indian economy earlier in January and in October last year as well. In January, it projected India's growth at 6.8% for the financial year 2022-23 but cut the forecast figures for the next fiscal, predicting some economic slowdown. The financial agency's faith in the Indian economy is a positive sign in the face of a sluggish global economy.
IMF growth projection lower than RBI
The figures in the IMF's biannual World Economic Outlook published on Tuesday is lower than the Reserve Bank of India's (RBI) GDP growth projection of 6.4% for the current fiscal. The RBI had forecast India's growth at 7% in the previous financial year, while the IMF predicted it to be around 6.8%. Separately, the global economy appears to be on a path to recovery.
IMF's country-wise growth predictions
Rising interest rates could put financial sector at risk
The IMF report also projects India's retail inflation to be around 4.9% for the current fiscal year and 4.4% for the next. However, it cautioned against the RBI increasing the repo rate, which would reduce lending and jeopardize the financial sector due to debts piling up. Notably, the RBI hiked the repo rate six consecutive times since May 2022 to control inflation.
2020-21 was better than we thought: Leigh
Explaining the reason for a downward revision of the growth projection, Leigh said, "We realize that 2020-21 has been actually a lot better than we thought and so actually there's less room for catching up." He said, "That pent-up demand from consumers that were informing our previous forecast is therefore going to be less because they've already had more catching up before."
Growth figures predicted for Germany, UK at -0.1%, -0.7% respectively
Meanwhile, the IMF report predicts China's growth, which was at 3% in 2022, at 5.2% in the current fiscal and 4.5% for the next financial year. The United States (US) is forecast to grow at 1.6% in 2023 and France at 0.7%, while the figures for Germany and the United Kingdom (UK) look bleak at -0.1% and -0.7%, respectively.
