The International Monetary Fund (IMF) has raised its forecast for growth in India's gross domestic product (GDP) in FY23 by 50 basis points (bps) to 9 percent.
India's GDP growth forecast for FY24 was also raised by 50 bps to 7.1 percent.
Explaining the upward revision in an update to its World Economic Outlook report, released on January 25, the IMF said it expects an improvement in India's credit growth – which would boost consumption and investment – and "better-than-anticipated performance of the financial sector".
The hike in the forecast for India for the next financial year was accompanied by a downward revision in the growth estimate for FY22 to 9 percent.
In October 2021, the IMF had forecast that India's economy would grow by 9.5 percent in FY22. Since then, the National Statistical Office's first advance estimate for national income for FY22 has pegged GDP growth for the year at 9.2 percent.
The IMF said its estimate for India's GDP growth in FY22 captures the impact of the Omicron variant of the coronavirus on economic activity.
While India's fortunes seem to have improved, the global growth forecast for 2022 was lowered by 50 basis points to 4.4 percent. However, the global growth forecast for 2023 was raised by 20 basis points to 3.8 percent, although this "largely reflects a mechanical pickup after current drags on growth dissipate in the second half of 2022".
| REGION | 2022 GROWTH FORECAST | 2023 GROWTH FORECAST |
| World | 4.4% | 3.8% |
| United States | 4.0% | 2.6% |
| Euro area | 3.9% | 2.5% |
| Japan | 3.3% | 1.8% |
| United Kingdom | 4.7% | 2.3% |
| China | 4.8% | 5.2% |
| Russia | 2.8% | 2.1% |
| Brazil | 0.3% | 1.6% |
"The global economy enters 2022 in a weaker position than previously expected. As the new Omicron COVID-19 variant spreads, countries have reimposed mobility restrictions," the IMF noted.
Worryingly, the IMF now expects elevated price pressures to persist for a longer period of time. In advanced economies, consumer prices are seen 3.9 percent higher in 2022, up a massive 160 basis points from the October 2021 forecast. In emerging markets and developing economies, consumer prices are seen 5.9 percent higher in 2022, up 100 basis points from what the IMF expected in October 2021.
Gita Gopinath, the IMF's erstwhile Chief Economist and the current First Deputy Managing Director, warned of disruptions to global supplies chains from China's 'zero-COVID strategy', and said the emergence of new and deadlier variants could prolong the ongoing crisis.
"Higher inflation surprises in the United States could elicit aggressive monetary tightening by the Federal Reserve and sharply tighten global financial conditions," Gopinath added.
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