The International Monetary Fund (IMF) forecasted that India and China would account for half of the global economic growth in 2023 and that the third-largest economy in Asia will continue to grow between 2023 and 2024. (FY24).
“India remains a brilliant example. In contrast to the US and the euro area combined, it will contribute to barely a tenth of global growth this year, according to the IMF’s most current edition of the bimonthly World Economic Outlook.
Due to “resilient domestic demand despite external constraints,” the global lender forecast that India’s growth will first decline from 6.8% in 2022 (FY23) to 6.1% in 2023 (FY24), before rising to 6.8% in 2024 (FY25).
“China’s sudden reopening abroad paves the way for a quick revival in activity. Additionally, the world’s finances got better as inflation pressures started to subside. According to IMF Chief Economist Pierre-Olivier Gourinchas, this and the US dollar’s drop from its November peak provided emerging and developing countries with some tempered relief.
The Indian economy would grow by 5.8% in FY24, according to a Monday forecast from IDFC First Bank. India’s economic conditions, which have proven to be resilient despite external headwinds, are being driven by urban consumption and the start of a capex cycle rebound. Results for publicly traded businesses indicate rising profits in Q3FY23, pointing to a moderating effect on input costs. It went on to say that both capital goods exports and imports hint to an improvement in the capex cycle.
Although global headline and core inflation are expected to decline in 2023, the IMF forecast that by 2024, it would still be greater than pre-pandemic levels in more than 80% of countries.
Gourinchas contends that if inflation pressures remain excessive, central banks must raise real policy rates beyond the neutral level and keep them there until it is evident that underlying inflation is declining. The ability to undo all earlier gains is one of the risks of relaxing too quickly. Emerging market economies should allow their currencies to change as much as possible in response to the more challenging global financial conditions. The economist said, “Capital flow restrictions or interventions in foreign exchange can aid in reducing excessive or unconnected volatility when appropriate.”