IMF projects 6.3% growth for India in FY24, says growth supported by macroeconomic stability

The Indian economy is projected to grow at 6.3 per cent in the current financial year 2023-24 and the next, the International Monetary Fund (IMF) said in a report.

The IMF, in its Article IV consultation report, which reviews a country's current and medium-term economic outlook, said the country's growth is expected to remain strong, supported by macroeconomic and financial stability.

The Reserve Bank of India (RBI), meanwhile maintaining the status quo in key policy rates, in its latest monetary policy meeting, raised India's GDP growth forecast for the financial year 2023-24 by 50 basis points to 7 per cent. In its October meeting, the RBI had forecast 2023-24 growth at 6.5 per cent.

This upward revision by the Indian central bank came on the heels of India reporting more-than-expected July-September quarter growth - 7.6 per cent.

"Going forward, the country's foundational digital public infrastructure and a strong government infrastructure program will continue to sustain growth. India has potential for even higher growth, with greater contributions from labour and human capital, if comprehensive reforms are implemented," the IMF report noted.

"Despite widespread global uncertainty, India is expected to grow above 6 per cent over the next five years driven by continued strong investment, still-growing private consumption, and digitalization-driven productivity gains."

In its report, on inflation front, the IMF projected 5.4 per cent for this fiscal year and 4.6 per cent for the next.

"Headline inflation is expected to gradually decline to the target although it remains volatile due to food price shocks," IMF said. "Domestically, weather shocks could reignite inflationary pressures and prompt further food export restrictions."

The recent increase in inflation driven by vegetable prices is expected to be temporary, it added.

RBI too maintained India's retail inflation projections for 2023-24 at 5.4 per cent, with Q3 at 5.6 per cent and Q4 at 5.2 per cent. CPI inflation for Q1:2024-25 is projected at 5.2 per cent; Q2 at 4.0 per cent; and Q3 at 4.7 per cent, with risks seen evenly balanced.

Further, the IMF said India's current account deficit is expected to improve to 1.8 per cent of GDP in 2023-24 as a result of resilient services exports and, to a lesser extent, lower oil import costs. Current account deficit (CAD) is the difference in value of a country's imports and exports. 

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