The current growth projection, which is closer to RBI’s 6.5% estimate, will help India retain its status as the world’s fastest growing major economy at a time when the view on China is less optimistic. China is expected to expand by 5% this year, against an earlier estimate of 5.2%, with the global economy projected to grow 3% this year, and 2.9% next year, 0.1% lower than earlier projection.
“The global economy is limping along, not sprinting… growth is well below historical averages,” Pierre-Olivier Gourinchas, IMF’s chief economist, said after releasing the latest World Economic Outlook (WEO) here. The outlook does not factor in the implications of the conflict in Israel, which is being watched closely.
Asked about India’s growth and inflation projections, which have been revised upwards from 4.9% to 5.5%, the IMF chief economist said, “India is one of the large emerging markets doing better than expected, it’s been doing better for a while. It is one of the growth engines in world economy. We are revising growth for fiscal year to 6.3%, but not changing next year’s projections. That’s a robust growth number, although there is a little bit of slowdown from last year. Inflation is also pushing up in India. Some of this is related to increased food prices in the country.” The Indian economy is projected to expand 6.3% in 2024-25 , according to IMF’s forecast.
Next year, inflation is expected to moderate to 4.6%, provided monetary policy remains “very focused on inflation”, said Daniel Leigh, who leads research at IMF. Inflation is one of the key risks confronting the global economy, the IMF said, while warning of volatile commodity prices.
“Inflation remains uncomfortably high… the near-term expectations have increased,” said Gourinchas and suggested that central banks around the world maintain a tight vigil and refrain from premature easing of interest rates.
With the tension in Israel pushing up oil prices, there is fear of a further rise in inflation. “One of the things we have observed is oil prices have increased somewhat over the last few days, by 4%. We see this often in situations when there is geo-political instability. This reflects the potential risk in production or transport of oil in the region. But it is too early to assess how much oil prices can be sustained,” said Gourinchas.