India took centre stage among the ‘BRICs’ economies in a recent International Monetary Fund (IMF) report that projected the Indian economy growth rate would bounce back to 6.8% in 2024.
The IMF said growth in India is set to decline from 6.8% in 2022 to 6.1% in 2023 – but then pick up to 6.8% in 2024. The country is showing “resilient domestic demand despite external headwinds”, the IMF said in its world economic outlook update of January 2023.
Findings of the United Nation’s financial agency align with the Reserve Bank of India’s forecast of real GDP growth at 6.8% for 2022-23.
Remarking that “external factors” would drive the slowdown, Pierre-Olivier Gourinchas, economic counsellor and director of research at the IMF, called India “a bright spot” in the global economy. “The country will account for 50% of the global growth in 2023 [along] with China, compared to just a 10th for the US and euro area combined,” Gourinchas said.
Overall, emerging markets and developing economies seem to be already “on their way up. We have a slight increase in growth for the region from 3.9% in 2022 to 4% in 2023,” added Gourinchas. The IMF estimated Chinese GDP to reach 5.2% in 2023 and 4.5% in 2024.
China and India both form part of an early pro-emerging market investment thesis often termed ‘BRICs’ (Brazil, Russia, India and China), which denoted the countries predicted to lead emerging market growth in the 2000s.
The IMF said that a number of factors leading to “surprisingly resilient” global growth in the third quarter of last year included robust labour markets; household consumption and business investment; management of the energy crisis in Europe; improved response to inflation; and the reopening of China.
The projections come amid expectations that the global economy would slow down from 3.4% in 2022 to 2.9% this year, before rebounding to 3.1% in 2024. Global inflation would witness further easing from 6.6% in 2023, to 4.3% in 2024—although still above pre-pandemic levels of about 3.5%—reported the IMF.
In January 2023, the World Bank revised its projections for India’s GDP growth downwards, from 6.9% to 6.6% in the financial year 2023-24. However, the bank estimated India to be the fastest-growing major economy in the world. According to Morgan Stanley’s ‘Why this is India’s decade’ report, the country is poised to become the world’s third-largest economy and stock market by 2030.
Sashi Reddy, portfolio manager at Stewart Investors, is not surprised by optimism relating to India. “Consensus on economic reform across political lines, a democratic system with checks and balances, and a rich universe of high-quality companies offer the country a long runway for growth in the coming year,” he said.
Reddy added that infrastructure investment has been India’s “Achilles heel” – but could also be its champion in the next decade. Other drivers of growth include an acceleration in financial inclusion for India’s 1.5 billion citizens, coupled with an emerging quality healthcare ecosystem.
“There’s little doubt that the country is on an encouraging path of growth with sustainable development at its core, making it an attractive destination for long-term investors.”
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