Facing global uncertainty and headwinds, the Indian economy will continue to perform well and maintain its position as one of the globe’s fastest-growing economies, a senior International Monetary Fund official said on Tuesday. The statement came when the IMF lowered its forecast for 2023-24 to 5.9 percent earlier.
Anne-Marie Gulde-Wolf, deputy director of the Asia-Pacific Department at the IMF, said, “The Indian economy is doing well, and it remains the quickly developing Asian economy and one of the most rapid growth in the world.” ”
“However, we have revise our estimates to include the most recent data released earlier this year. Based on this information, we now estimate that the growth rate in the fiscal year 2023-24 will be 5.9%, slightly lower than our previous estimate of 6.1 percent in the January WEO due to an expected slowdown in consumption growth,” he said.
In answer to a query, Gulde-Wolf remarked, “In fact, we’ve seen evidence of this fall in consumption growth in the CY 2022:Q4 figures, as the massive rise in so-called “revenge consumption” has fade.
She added that with consumption slowing, the IMF sees investment as the main growth driver, as evidenced by double-digit credit expansion, strong PMIs, and an enterprising budgeted government spending program.
She said that infrastructure investment has a potentially large impact on long-term sustainable growth and is, therefore, a major policy priority.
Another positive contributor to growth has been net exports, especially services exports, which have shown very strong performance. An IMF official said the significant improvement in the current account in the last fiscal year would continue this year as commodity price was expect to decline.
“Risks are skew to the downside and stem mainly from external factors, including a stronger-than-expected contraction in external demand in partner countries, tighter global financial conditions, and stronger-than-expected contagion effects from the recent volatility of the global financial market,” Guldelobo said.
In response to a question, she said India and China, the world’s two largest and fastest-growing economies, can act as major economic engines, driving global growth through consumption, investment and trade.
He said that India and China are fast becoming centers of technological innovation, driving global progress in information technology, renewable energy and AI.
“China and India can help control economic fragmentation in the current geopolitical situation. The IMF has emphasize the potential costs and negative effects of economic fragmentation. India and China play a significant role in the international community, including the G20, which was compose of key members and key members. It may contribute positively to preserving global economic cooperation.
In the end, Golde-Wolf remarked, “China and India can expand South-South cooperation as major developing economies, encouraging economic growth and stability in other rising markets and developing countries.”
The IMF expect the growth rate in China to increase from 3.0 percent this year to 5.2 percent in 2022, he said. China’s growth alone was expect to explain more than a quarter of global growth in 2023.
It would also generate positive spillover effects around the world: on average, for every percentage point of growth in China, growth in other countries was project to increase by about 0.3% over the medium term.
China’s 2023 growth rebound will be driving by private consumption rather than infrastructure investment: the spillover effect on the rest of Asia from higher consumption in China was project to be larger than other growth drivers, such as investment. The IMF official said that the short-term impact on the rest of Asia would vary from country to country, with those dependent on tourism likely to benefit the most.
When asked about the major challenges facing Asian countries, Golde-Wolf said that in the short term, the economies face challenges from inflation: Inflation in most of Asia is not as high as in other countries, but it is more difficult to control by central banks remains above target despite fall in commodity prices.
The fact that core inflation has remain steady suggests that central bank interest rates may need to stay high for a while.
Asian economies also face challenges stemming from greater uncertainty in the external environment. He said there has been considerable volatility in exchange rates, financial conditions and capital flows over the past year as markets digested news affecting monetary policy decisions in the US and Europe.