The International Monetary Fund (IMF) praised India and said the country’s strong performance is likely to continue and it has the potential to “grow faster and more sustainably if a comprehensive structural reform agenda is implemented”.

The IMF division chief Daniel Leigh, on December 19 reposed faith in the Indian economy saying it is a “very strong economy.” One of the bright spots in the global economy right now is its high growth rate, he added.

The IMF on Tuesday lowered its growth projection for 2023-24. In its Article IV consultations the IMF’s staff said the tightening of fiscal stance in 2023-24 is appropriate and that an ambitious medium-term consolidation plan is required to rebuild buffers and preserve debt. However, India continues to be the fastest-growing economy in the world, World Economic Outlook revealed.

The Indian government is looking to lower its fiscal deficit to 5.9 per cent of GDP in the current financial year. In the medium-term, the fiscal deficit is expected to be lowered to 4.5 per cent of GDP by 2025-26. In India, the IMF growth forecast is, however, lower than the Reserve Bank of India (RBI) projection. The central bank had predicted 7 per cent GDP growth for FY 2022-23 and 6.4 per cent in the ongoing fiscal that started on April 1.

In its report, the IMF said the Indian government remains ‘committed’ to the 4.5 per cent fiscal deficit target. The adjustment will be implemented evenly over 2024-25 and 2025-26. State government deficits are expected to remain below the 3 per cent GDP ceiling, in line with the historical performance. The international agency has warned that India’s high public debt warranted additional revenue and expenditure measures, such as further Goods and Services Tax and subsidy reforms, with focus on public investment and targeted support for the vulnerable. On the growth front, the IMF expects the Indian economy to expand by 6.3 per cent in the current and next year, 20 basis points lower than the government’s forecast of 6.5 per cent.

China projects its growth rate to be 5.2 per cent in 2023 and 4.5 per cent in 2024. The growth rate was three per cent in 2022. The US’s growth forecast for 2023 is 1.6 per cent, France’s 0.7 per cent, while Germany and the UK are at a dismal -0.1 per cent and -0.7 per cent, respectively. However, most countries will avoid recession in 2023 despite the lingering pandemic lingering and tightening financing conditions even as the Russia-Ukraine war continues.

The World Economic Outlook update will be released by the IMF in late January 2024.