IMF Forecast For Global Growth

GS Paper III Indian Economy

Context:

The International Monetary Fund has raised its forecast for global growth this year in the July update of its World Economic Outlook.

Globally:

Global Growth Projection: The IMF’s World Economic Outlook raised the global growth forecast for the current year to 3%, up from the previous 2.8% forecast in April.
- Reasons: Due to reduced chances of a recession in the US, where inflation declined to 3% in June.
US Economy Projection: The IMF projects the US economy to grow 1.8% in the calendar year 2023, an increase of 0.2 basis points from the April estimate.
Global inflation expected to decline: IMF projects global inflation to decrease from 8.7% in 2022 to 6.8% in 2023.
Core inflation to fall gradually: Core inflation, excluding volatile items, predicted to decrease gradually from 6.5% in 2022 to 4.7% in 2024.
Downside Risks to Global Growth:
- Various factors, including geopolitical tensions (e.g., war in Ukraine) and extreme weather-related events, could lead to further shocks impacting economic growth.
- Tighter monetary policy may be implemented in response to inflationary pressures, affecting economic activity.

India’s Growth Projection:

It has raised India’s GDP growth forecast for the current fiscal year to 6.1% from the previous prediction of 5.9% made in April 2023.
- Reasons: Due to stronger-than-expected growth in the fourth quarter of 2022 and robust domestic investment.
- The National Statistical Office reported an increase in investments by 8.9% during January-March, up from 8% during October-December.

Other Growth Projections for India:

Organisation	India’s GDP Growth Forecast (%)	Reason/Comment
Asian Development Bank (ADB)	6.4%	Retained forecast due to recovery in consumption demand in both rural and urban areas, but cautioned about subdued exports due to the global slowdown
Fitch (Global Rating Agency)	6.3%	Raised forecast from 6% (predicted in March) to 6.3% due to improved economic conditions

Additional Information:

About International Monetary Fund (IMF):

It is an international financial institution established in 1944 to promote global economic stability and cooperation.
Goal: To ensure the stability of the international monetary system and facilitate international trade.
Members: 190 member countries, each of which contributes funds to the IMF based on its economic size and needs.
Decision-making power: The IMF’s decision-making power is determined by the size of a country’s financial contribution, with larger economies having more influence.
Headquarters: Washington, D.C.
Key publications:
- World Economic Outlook (WEO)
- Global Financial Stability Report (GFSR)