“Very strong economy…,” IMF division chief Daniel Leigh on India’s growth trajectory

He said that India is one of the bright spots in the global economy right now with a high growth rate.

“Yes, we have a growth rate for India which is 6.8 in 2022. Let’s not forget this is one of the bright spots in the global economy right now. Such a high growth rate and it is moderating down to 5.9 with a -.2 revision compared to January, what’s happening here is also a set of historical revisions,” said Leigh.

IMF on Tuesday lowered its growth projection for 2023-24 to 5.9 per cent from 6.1 per cent earlier but despite a significant drop, India continues to be the fastest-growing economy in the world, the World Economic Outlook figures revealed.

“We realize that 2020-2021 has been actually a lot better than we thought and so actually there’s less room for catching up. And 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. So that’s why there’s a downward revision this year. Then we go up to 6.3 next year again, a very strong economy which is necessary to allow India to continue to converge towards higher living standards and create those jobs that are necessary,” added Leigh.

The IMF projects India’s inflation to slow to 4.9 per cent in the current year and further to 4.4 per cent next fiscal year.

IMF growth forecast is lower than the Reserve Bank of India (RBI) projection. The central bank predicted 7 per cent GDP growth for FY 2022-23 and 6.4 per cent in the ongoing fiscal that started on April 1.

Meanwhile, the international lender flagged concerns about inflation, debt and risks to the financial sector from rising interest rates. It warned that if banks cut lending further, the global output will reduce by another 0.3 percentage point in 2023.

“Despite the fillips from lower food and energy prices and improved supply-chain functioning, risks are firm to the downside with the increased uncertainty from the recent financial sector turmoil,” the report said.

The IMF projects growth to bottom out at 2.8 per cent in 2023, picking up to 3 per cent in 2024. Inflation is expected to stay elevated at 7 per cent for the rest of the year, before declining to 4.9 per cent next year.

China’s growth rate is projected to be 5.2 per cent in 2023 and 4.5 per cent in 2024 against its growth rate of three per cent in 2022.

The US’s growth forecast for 2023 is 1.6 per cent, France’s 0.7 per cent, while Germany and the UK are a dismal -0.1 per cent and -0.7 per cent, respectively.

Most countries will, however, avoid recession in 2023 despite the COVID pandemic lingering and tightening financing conditions as the Russia-Ukraine war continues.