India’s economy has exhibited robust growth in 2023, showcasing resilience and stability amidst global economic challenges, the International Monetary Fund (IMF) has said.
In its press release published on Tuesday, IMF highlighted the country’s key developments, indicating positive trends in various sectors.
“India’s economy showed robust growth over the past year,” the IMF said.
The headline inflation, on average, has moderated, though it remains somewhat volatile. Employment levels have surpassed pre-pandemic figures, with the informal sector continuing to dominate while formalisation has progressed.
The financial sector is experiencing its strongest phase in several years, remaining largely unaffected by global financial stress in early 2023.
Despite challenges, the current account deficit in the fiscal year 2022/23 widened due to the post-pandemic recovery of domestic demand and transitory external shocks. This offset the positive impact of robust service exports and proactive diversification of critical oil imports.
While the budget deficit has eased, the press release emphasises the need to address the elevated public debt and rebuild fiscal buffers. India’s 2023 G20 presidency underscores the country’s significant role in advancing multilateral policy priorities on the global stage.
Looking ahead, the Bretton Wood organisation projects continued strong growth, with real GDP expected to grow at 6.3 percent in FY2023/24 and FY2024/25.
On inflation, the IMF noted that headline inflation is expected to gradually decline to the target despite remaining volatile due to food price shocks. The current account deficit is expected to improve to 1.8 percent of GDP in FY2023/24, driven by resilient service exports and lower oil import costs.
It emphasised the importance of a growing digital public infrastructure and government involvement in sustaining this growth. India has the potential for even higher growth, with greater contributions from labour and human capital, if comprehensive reforms are implemented.
It said, “Going forward, the country’s foundational digital public infrastructure and a strong government infrastructure programme 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.”
While the outlook is generally positive, the IMF notes balanced risks. A global growth slowdown could impact India through trade and financial channels, and further global supply disruptions might lead to commodity price volatility and increasing fiscal pressures.
It warned that weather shocks could reignite inflationary pressures and prompt food export restrictions. On the upside, stronger-than-expected consumer demand and private investment could boost growth, and the liberalisation of foreign investment could enhance India’s role in global value chains.
It encouraged the implementation of labour market reforms, which have the potential to drive increased employment and growth.