Amid Fear of Recession, IMF Forecasts Growth in India at 6.8% In 2024

India is projected to surpass Germany to become the fourth-largest economy by 2027 is expected to expand faster than Japan by 2028.

(Photo: The Quint)

While the fear of a recession looms and this year is expected to witness slugging numbers in terms of economic development, special praise finds its way to India.

The International Monetary Fund (IMF) in the January update of its World Economic Outlook said on Tuesday, 31 January, that the country's path to a strong economic model and making the population digitally compliant have been tough but helped greatly.

India is projected to surpass Germany to become the fourth-largest economy by 2027 is expected to expand faster than Japan by 2028.

Key takeaways: The global growth which is estimated at 3.4 percent in 2022 is projected to fall to 2.9 percent in 2023 and then rise to 3.1 percent in 2024. World trade growth is expected to decline in 2023 to 2.4 percent and rise to 3.4 percent in 2024, IMF said.

What's the forecast for India? The Indian economy is expected to slowdown in the next fiscal year, said the International Monetary Fund (IMF) on Tuesday. India’s inflation moderated to an 11-month low 5.88 percent in November from 6.77 percent a month before, it said.

Growth in India is set to rise to 6.8 per cent in 2024, after plummeting to 6.1 per cent in 2023 from 6.8 per cent in 2022.

What's working for India? India's strengths lie in services and manufacturing, said IMF Deputy Managing Director Antoinette Sayeh. “Macroeconomic policies are responding to the significant headwinds, with fiscal policy measures supporting vulnerable groups and monetary policy addressing persistently high inflation,” she added. The DBT or Direct Benefit Transfer scheme which transfers government funds directly to beneficiaries without any interference from middlemen was called a “Logistical Marvel”.

Political stability and serving as an investment destination for foreign multinationals can continue to drive structural flows into the country via FDI, the report stated.

Why are forecasts for 2023 low? The factors that have led to the decline in growth in 2023 are emerging market and developing economies, rise in central bank rates to fight inflation — especially in advanced economies — as well as the war in Ukraine. 

What about 2024? Growth is expected to rise in 2024 as economies would recover from the effects of the war in Ukraine and inflation will subside. 

A good sign? It is to be noted that these estimates are higher by about 0.2 percentage point in comparison to the October forecast. This is a reflection of good domestic economic demand and resilience.

Is recession impending? The present projections are even lower that the estimates during the historical 1999-2000, when the annual average was 3.8 per cent. However, it is predicted that there will not be a negative growth in global GDP or global GDP per capita, which means there will not be a global recession.

The China Factor IMF said growth in emerging and developing Asia is expected to rise in 2023 to 5.3 per cent and in 2024 to 5.2 per cent as China's economy is expected to pick up this year. Growth in China is projected to rise to 5.2 per cent in 2023, reflecting rapidly improving mobility, and to fall to 4.5 per cent in 2024. In a blog post Pierre-Olivier Gourinchas, Chief Economist and Director, Research Department of the IMF wrote that India remains a bright spot. Together with China, it will account for half of global growth this year, in comparison to the US and UK area combined that will account for only one-tenth.