THE FORECAST GETS GLOOMY

Three global agencies—the International Monetary Fund (IMF), the World Bank and the United Nations—have lowered their forecast on India’s growth in the current financial year.

- M.G.Arun

On April 11, the IMF trimmed its GDP growth forecast for India for FY24 by 20 basis points to 5.9 per cent and for FY25 by 50 basis points to 6.3 per cent. One hundred basis points constitute one percentage point. The forecast for the current fiscal is much lower than the Reserve Bank of India’s (RBI) projection of 6.5 per cent for FY24. Considering that the RBI estimated GDP growth in FY23 at 6.8 per cent (per the RBI), the IMF projection of 5.9 per cent is a significant drop from the previous fiscal. The Centre has not released the final numbers for 2022-23 yet.

India’s growth numbers may look better compared to other developed economies, but then those economies are also far bigger. IMF projects the US and Europe to grow at 1.6 per cent and 0.8 per cent in calendar year 2023, from 2.1 per cent and 3.5 per cent, respectively. China is expected to grow by 5.2 per cent this year. The UK and Germany are likely to experience a recession in 2023, with growth expected to contract by 0.3 per cent and 0.1 per cent, respectively. Japan is the only major economy that may see a rise in GDP growth in 2023.

On April 4, the World Bank said India’s GDP growth is expected to moderate to 6.3 per cent in FY24 (from its estimate of 6.6 per cent earlier). This, the World Bank said, was due to rising borrowing costs and slower income growth weighing on private consumption growth. With the easing of pandemic-related fiscal support measures, government consumption too is projected to grow at a slower pace, it said.