IMF raises India's 2023 GDP growth projection to 6.3%, lowers China's outlook

The International Monetary Fund (IMF) has revised India's growth forecast for 2023 upward to 6.3%, in line with its unchanged outlook for 2024.

This revision reflects "stronger-than-expected consumption" in the April-June quarter.

In April, the IMF had lauded India as "one of the bright spots in the global economy." It also anticipates India's growth to be the highest among developing economies, even as global economic growth faces challenges due to events such as Russia's 20-month war in Ukraine and the Israel-Hamas conflict.

Previously, the IMF had reduced India's growth projections for the current fiscal year from 6.1% to 5.9% and for the 2024/25 fiscal year from 6.8% to 6.3%.

India's central bank, the Reserve Bank of India, has maintained its growth forecast for this fiscal year at 6.5%.

Conversely, the IMF has downgraded China's growth projections. The 2023 figures have been revised from 5.2% to 5%, while the 2024 figures have been lowered from 4.5% to 4.2%. This downgrade is attributed to concerns about China's real estate sector. IMF Chief Economist Pierre-Olivier Gourinchas emphasised the need for "forceful action" by the Chinese government to restore confidence in the sector.

Among developed economies, the United States has exhibited a strong upward trend. The US economy is now expected to grow by 2.1% this year, up 0.3% points from the previous forecast, and by 1.5% next year, an impressive 0.5 points higher. In contrast, the Euro area is projected to grow by just 0.7% this year and 1.2% next year, impacted by the war in Ukraine's effect on energy prices and resilient consumer spending, as well as enhanced pandemic-related support to businesses.

Germany's outlook within Europe has worsened since July, and it is now the only G7 country expected to enter a recession either this year or next.

The IMF has also raised Japan's growth outlook to 2% for this year.

Overall, at its annual meeting in Morocco's Marrakech, the IMF acknowledged that the global economy had displayed "remarkable" resilience in its recovery from the Covid-19 pandemic and other global risks. Nevertheless, it highlighted that "growth remains slow and uneven, with growing global divergences."

The IMF cautioned that "the global economy is limping along, not sprinting" and mentioned that extreme weather-related events in the current year had significantly impacted global economic growth.

The IMF's global growth estimate for this year is 3%, with its 2024 assessment reduced to 2.9%, down 0.1% from the previous forecast in July.