Krishna Srinivasan, director, Asia Pacific Department, IMF, said India and China are expected to jointly account for half the world’s growth in 2023 and 2024, with India’s share at 16% and the remaining being contributed by China.

“India’s economic growth remains robust, driven by a large public capital expenditure push and resilient Domestic Demand,” said Srinivasan.

The IMF recently revised upwards India’s growth estimate to 6.3% in FY24, due to resilient domestic Demand and strong investment inflows. Meanwhile, the Chinese economy, it said, is expected to expand 5% in 2023 and 4.2% in 2024, lower than 5.2% and 4.5%, respectively, estimated in April.

In a report titled Regional Economic Outlook for Asia and Pacific, the IMF said growth in Asia-Pacific is expected to rise from 3.9% in 2022 to 4.6% in 2023. IMF staff estimate that Asia’s growth will slow to 4.2% in 2024 and to 3.9% in the medium term—the lowest in the past two decades except for 2020.

“In Asia’s advanced economies, tight financial conditions will hold back demand, while the outlook for exports will depend on price movements of global commodities (Australia, New Zealand) and the technology cycle (Korea, Singapore, Taiwan),” the report said.

Thomas Helbling, deputy director, Asia Pacific Department, IMF said India is a bright spot in the current global picture.

“What we also see in India which is important is robust domestic demand; public capital expenditure with some crowding in of private investment helps,” said Helbling.

He added that while it is true that after covid-19 much of the momentum in domestic demand was carried by urban consumption, this kind of divide will not widen and will eventually narrow.

On India’s prospects of benefiting from the global move to diversify beyond China, Helbling said China-plus-one is visible on the ground and India has been a beneficiary of it. “Many factors favour India like the demographic dividend. Given that India is a large economy, it could benefit more with appropriate structural reforms, easing FDI (foreign direct investment) norms, upskilling of the labour force and deepening of the financial system,” said Helbling.

As per IMF, relatively accommodative financial conditions will aid domestic demand in Asia’s emerging markets, despite monetary policy tightening — although external demand and sluggish investments will pose challenges. China’s weaker near-term growth outlook will weigh on regional growth, it said, adding that the Chinese economy is expected to expand by 5% in 2023 and by 4.2% in 2024—a downward revision of 0.2 and 0.3 percentage points compared to the April 2023 World Economic Outlook.

The report pointed out that the global economic backdrop has remained challenging for economies in the Asia and Pacific region, with central banks tightening monetary policy across the globe. However, a fall in global commodity prices from the 2022 peak supported disinflation.

“The boost from China’s reopening in the first half of the year was above expectations. Strong private demand yielded positive growth surprises in India,” it said.

While China’s inflation remains low and well-below target, reflecting falling food and fuel prices and still sizable economic slack, headline inflation in India rose in the third quarter due to a weather-related vegetable price shock.

According to the IMF, the emerging market economies of the Association of Southeast Asian Nations (Asean) are expected to see growth of 4.2% in 2023 and 4.6% in 2024—a 0.3 percentage point downward revision relative to April. The downgrade, it said, reflects not only weaker external demand, but also lacklustre domestic demand as a result of monetary policy tightening.

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Updated: 19 Oct 2023, 09:53 PM IST