India and China are projected to jointly contribute about half of the world’s growth in both 2023 and 2024, the International Monetary Fund (IMF) said in its latest Regional Economic Outlook (Asia and Pacific) report.
India’s economy is projected to grow at 6.3% in FY24 and FY25 – the fastest among the major economies of the world, while China’s economy is likely to grow at 5% in 2023 and 4.2% in 2024. The IMF said that “strong” private demand yielded positive growth surprises in the country. In Q1FY24, India’s economy grew at 7.8%. The private financial consumption expenditure during the quarter grew at 6% year-on-year as against 2.8% in Q4FY23.
The upward revision of India’s FY24 growth forecast by 20 basis points by the IMF was done due to resilient domestic demand and strong investment inflows, said the agency.
On price pressures, the IMF noted that in India, Maldives, and Vietnam, headline (CPI) inflation has been only slightly higher than before the pandemic period, without clear troughs or peaks.
For FY24, the IMF has projected CPI inflation to average 5.5% in FY24 and 4.6% in FY25. The projections for both years are 10 basis points higher than the Reserve Bank of India’s estimates. Meanwhile, the multilateral agency projected the world’s economy to grow at 3% in 2023 and 2.9% in 2024.
“Asia and Pacific will remain the most dynamic region this year, with growth expected to rise from 3.9% in 2022 to 4.6% in 2023,” the IMF noted.
However, in 2024, the agency expects Asia’s growth to slow down to 4.2% and to 3.9% in the medium-term, which would be the lowest in the past two decades except for 2020.
“Medium-term growth is expected to moderate further, to 3.9% as China’s structural slowdown and weaker productivity growth in many other economies weigh on the region—developments that reflect in part the spectre of global de-risking. Inflation is expected to fall in 2024 within central bank targets in most countries—a faster pace of disinflation than in other regions,” the IMF said.
In Asia’s advanced economies, tight financial conditions will hold back demand, while the outlook for exports will depend on price movements of global commodities (Australia, New Zealand) and the technology cycle (Korea, Singapore, Taiwan Province of China), the IMF said.
And in Asia’s emerging markets, “relatively accommodative” financial conditions will support domestic demand despite monetary policy tightening, but external demand and lacklustre investment will be headwinds to growth, it said.
“Medium-term prospects are clouded by risks from geo-economic fragmentation, with de-risking policies of major economies creating a potentially significant drag on growth. On the other hand, a comprehensive set of reforms in China would boost medium-term growth prospects, especially for smaller and more open economies,” the IMF said.
bY Priyansh Verma
https://www.financialexpress.com/policy/economy-india-china-to-contribute-half-of-worlds-growth-in-2023-2024-imf-3276960/
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