India’s economic growth is resilient this fiscal year, IMF says

India’s economic growth in the current fiscal year is robust and, coupled with China’s recovery, will drive 4.6% growth in Asia versus 3.8% a year ago, the International Monetary Fund said in its regional economic outlook.

Asia-Pacific will be the most dynamic of the world’s major regions in 2023, largely due to buoyant prospects for China and India, the IMF said. The region’s two largest emerging economies are expected to account for about half of global growth this year, with the rest of the region contributing another 20%.

The agency last month forecast 5.9% growth for India this fiscal year.

The IMF said Asia’s domestic demand has remained strong so far despite monetary tightening, while external appetite for tech products and other exports is flagging.

“We expect the region to contribute around 70% to global growth this year as its expansion accelerates to 4.6% from 3.8% last year,” the multilateral agency said, adding that China’s reopening will give new impetus. That’s a 0.3 percentage point upgrade from the October outlook.

“Asia’s momentum is primarily driven by the recovery in China and robust growth in India, while growth in the rest of Asia, in line with other regions, is expected to bottom out in 2023,” the IMF said.

China’s economy is expected to grow 5.2% in 2023 after private consumption rebounded amid rapid economic reopening. But growth momentum will gradually slow in India as slowing domestic demand offsets strong external demand for services. According to the IMF, growth in India is likely to weaken slightly from 6.8% in March to 5.9% this year.

India’s official forecast for FY24 is 6.5% growth. Late last month, the Treasury Department pointed to downside risks to the official forecast from OPEC oil production cuts, financial sector troubles in developed markets affecting cash flow and insufficient monsoon rains from El Nino affecting agricultural production and prices could affect.

The IMF’s April fiscal year growth forecast for India of 5.9% is a 0.2 percentage point downgrade from its January estimate, reflecting the turmoil in the financial system, which in turn is likely to weigh on global growth.

India’s economy is expected to have grown by 7% in FY23. Officials also expect that cleaner corporate and bank balance sheets would help a recovery in private investment.

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