India set to contribute 15% of global growth in 2023: IMF MD

Washington: India continues to remain a relative “bright spot” in the world economy, and will alone contribute 15 per cent of the global growth in 2023, International Monetary Fund (IMF) managing director Kristalina Georgieva said.
While digitisation pulled out the world’s fifth-largest economy from pandemic lows, prudent fiscal policy and significant financing for capital investments provided in the next year’s budget will help sustain the growth momentum.
“India’s performance has been quite impressive. For this year, we expect India to retain a high growth rate, 6.8 per cent for the year that ends in March. For FY 2023/24 (April 2023 to March 2024) we project 6.1 per cent, a bit of slow down like the rest of the world economy, but way above the global average. And in that way, India is providing about 15 per cent of global growth in 2023,” Georgieva told PTI in an interview.
Responding to a question on the challenges to India’s growth prospects, the IMF director said that despite doing better than the rest of the world, inflation remains a key challenge.
“Inflation is a concern. When the core inflation remains sticky, interest rates have to be tightened. So how that bears on the domestic demand is a key challenge for the Indian economy, because the external environment is weak due to the Ukraine war and the slowdown in western economies,” added Srinivasan.
On February 8, RBI had raised the repo rate by 25 basis points to 6.5 per cent. Despite a cumulative hike of 250 basis points in the key rate since last year, retail inflation in January came above RBI’s upper tolerance limit of 6 per cent–at 6.52 per cent–leading experts to project more rate hikes in the coming months.Srinivasan said intervention by the central banks through exchange rate seldom helps in arresting the depreciation in currencies and that the market should be allowed to run its own course. “In general, when you have these persistent shocks, intervention seldom helps. You rather allow the exchange rate to move and adjust [on its own]”, he added.
Srinivasan said fading supply chain disruptions and the boom in the service sector have made way for stronger recovery in Asia. “The economic headwinds that faced Asia and the Pacific last year have started to fade. Global financial conditions have eased, food and oil prices are down, and China’s economy is rebounding,” he added.