India to contribute 15.4% of global growth this year: IMF

Asia’s economic growth will accelerate to 4.6 per cent in 2023 from 3.8 per cent in the previous year on the back of China’s reopening from Covid-19 restrictions, the International Monetary Fund (IMF) said in a report.

India will maintain its position as one of the fastest-growing economies in the world, contributing 15.4 per cent to global growth this calendar year.

India and China, together, will generate about half of the global growth. China is projected to contribute 34.9 per cent to the global growth in 2023. About 70 per cent of the global growth this year will come from Asia.

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“Asia’s domestic demand has so far remained strong despite the monetary tightening, while the external appetite for technology products and other exports is weakening,” the IMF noted in its ‘Regional Economic Outlook’ report.

“We project the region will contribute around 70 per cent of global growth this year as its expansion accelerates to 4.6 per cent from 3.8 per cent last year,” it said.

The IMF has raised Asia’s growth projection for the current year by 0.3 percentage points to 4.6 per cent from its earlier forecast of 4.3 per cent announced in October 2022. However, the growth projection for 2024 has been cut by 0.2 percentage points to 4.4 per cent.

The main reason for the upward revision of Asia’s economic growth projection in the current year is the reopening of China from Covid-19 restrictions.

“China’s reopening will provide fresh momentum. Normally the strongest effect would be from demand for investment goods in China, but this time the biggest effect is from demand for consumption,” the IMF said.

Other emerging economies in the region are on track to enjoy solid growth, though in some cases at slightly lower rates than seen last year, it added.

However, the IMF warned that global growth is poised to decelerate as rising interest rates and Russia’s war in Ukraine weigh on activity. Inflation remains stubbornly high, and banking strains in the United States and Europe have injected greater uncertainty into an already complex economic landscape.

On challenges to Asia, the IMF noted: “In the short term, monetary and fiscal policies will need to remain tight to bring inflation durably back to central bank targets and stabilise the public debt. An integrated policy response using all available tools will be needed to manage global shocks.”

While Asia’s financial systems haven’t seen major impacts following recent banking turmoil in the United States and Europe, they need to be carefully monitored given the high leverage among households and corporates, the Washington-based multilateral agency added.