India's economic growth will slow down to 6.1% during 2023 as compared to 6.8% in 2022 before picking up to 6.8% in 2024, with resilient domestic demand despite external headwinds, the International Monetary Fund (IMF) says in its latest World Economic Outlook Update of January 2023. The slowing economic growth in 2023 is attributed to a weaker-than-expected recovery, subdued external demand, and tightening monetary and financial conditions.
The cut in GDP growth for 2023 this time comes after a similar downgrade in October 2023 when the US-based multilateral agency slashed projections for India's growth by 60 basis points to 6.8% in 2023. The IMF, however, has changed India's growth forecast for 2024 upward to 6.8% from 6.1% in its October 2022 outlook.
The IMF in its previous regional economic outlook for Asia and the Pacific had also said the strong recovery in South Asia will take a breather, with India’s economy expanding at 6.8% in 2022, which was revised down by 1.4 percentage points since the IMF's April 2022 outlook.
In January 2023, the World Bank also issued a report, saying the GDP growth of India will slow down to 6.6% in the financial year 2023-24 from 6.9% projected earlier. Despite downward projects, India is expected to be the world's fastest-growing major economy, says the global agency.
The IMF's projections for FY 2023 are somewhat in line with the Reserve Bank of India's (RBI) estimates, which in December 2022 pegged the real GDP growth at 6.8% for 2022-23.
The RBI had said the reasons behind lowering the GDP forecasts were headwinds emanating from protracted geopolitical tensions, global slowdown and tightening of global financial conditions.
The economic growth in the ASEAN-5 countries (Indonesia, Malaysia, Philippines, Singapore, Thailand) is similarly projected to slow to 4.3% in 2023 and then pick up to 4.7% in 2024.
Growth in emerging and developing Asia is expected to rise in 2023 and 2024 to 5.3% and 5.2%, respectively, after the deeper-than-expected slowdown in 2022 to 4.3% attributable to China’s economy, says IMF.
"China’s real GDP slowdown in the fourth quarter of 2022 implies a 0.2 percentage point downgrade for 2022 growth to 3.0 percent—the first time in more than 40 years with China’s growth below the global average," says the global financial body.
Growth in China, says the IMF, is projected to rise to 5.2% in 2023, reflecting rapidly improving mobility, and to fall to 4.5% in 2024, before settling at below 4% over the medium term amid declining business dynamism and slow progress on structural reforms.
On the global front, IMF says the global growth is projected to fall from an estimated 3.4% in 2022 to 2.9% in 2023, then rise to 3.1% in 2024. The forecast for 2023 is 0.2 percentage points higher than predicted in the October 2022 outlook but below the historical (2000–19) average of 3.8%.
The IMF says the rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity. The rapid spread of COVID-19 in China dampened growth in 2022, but the recent reopening has paved the way for a faster-than-expected recovery, it adds. Additionally, global inflation is expected to fall from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024, still above pre-pandemic (2017–19) levels of about 3.5%.
