IMF cuts India's FY24 GDP growth forecast by 20 bps to 5.9%

The IMF's latest growth forecast for India for the current fiscal is well below the RBI's 6.5 percent.

The International Monetary Fund (IMF) has cut its GDP growth forecast for India for the financial year 2023-24 by 20 basis points to 5.9 percent.

The latest growth forecast by the multilateral agency is broadly in line with what private-sector economists expect and is significantly lower than the Reserve Bank of India's (RBI) projection of 6.5 percent.

On April 6, the RBI raised its growth forecast for the current year by 10 basis points in its first monetary policy review of FY24.

One basis point is one-hundredth of a percentage point.

The Indian economy is estimated to have grown by 7 percent in 2022-23 as per the statistics ministry, though the IMF's estimate is 6.8 percent.

In its World Economic Outlook report released on April 11, the IMF also cut India's growth forecast for the next year by 50 basis points to 6.3 percent.

The cut was part of a series of revisions by the IMF, which now sees the world economy growing by 2.8 percent in 2023 and 3 percent in 2024, down 10 basis points each from the January forecasts.

"Tentative signs in early 2023 that the world economy could achieve a soft landing – with inflation coming down and growth steady – have receded amid stubbornly high inflation and recent financial sector turmoil," the IMF said in its report, referring to the collapse of regional banks in the US and the takeover of Credit Suisse by UBS in Switzerland.

While global growth is now seen 10 basis points lower in 2023 as well as 2024, the IMF raised its forecast for the US economy by 20 basis points to 2.8 percent in 2023 and 10 basis points to 3 percent in 2024.

Among the developed economies, the Euro area is seen growing marginally faster in 2023, though its forecast for 2024 has been cut by 20 basis points to 1.4 percent.

No change was made to China's growth forecasts, with the world's second-largest economy expected to grow 5.2 percent in 2023 and 4.5 percent in 2024.

"China is rebounding strongly following the reopening of its economy," the IMF report said.

Source: International Monetary Fund

Back in January, the IMF warned that Chinese growth may settle "below 4 percent over the medium term amid declining business dynamism and slow progress on structural reforms".

However, on April 11, the IMF said China's reopening and growth may generate positive spillovers, especially for those nations with stronger trade links and reliance on Chinese tourism.