The Indian economy will grow faster than previously estimated this year, the International Monetary Fund said in its World Economic Outlook released Tuesday, and remain the world’s fastest growing major economy this year and next, but global growth will slow marginally next year even as global inflation rises faster than previously estimated.

The latest WEO data now expects India’s 2023-24 GDP growth to be 6.3%, a 20-basis point increase from the July numbers. One basis point is one hundredth of a percentage point. The IMF’s 2023-24 growth forecast for India is now the same as what the World Bank had projected in its India Development Update on October 3. India’s 2024-25 GDP growth forecast has been left unchanged at 6.3% in the October WEO data. While the IMF’s upward revision of India’s 2023-24 GDP growth comes in the wake of a strong 7.8% growth in the quarter ending June 2023, the annual growth number is still lower than the 6.5% projection by RBI’s Monetary Policy Committee.

Also read: Amid Israel-Hamas conflict, IMF outlook worsens for a ‘limping’ world economy

While India continues to outperform major economies, the commentary about the state of the global economy is rather sober. “The global economy is limping along, not sprinting”, IMF Chief Economist Pierre-Olivier Gourinchas wrote in a blog. IMF now expects global GDP growth to be 3% in 2023, which is the same as its July forecast. Global GDP growth for 2024, however, has seen a reduction of 10 basis points from the July forecast to 2.9%.

“Economic activity still falls short of its pre-pandemic path, especially in emerging market and developing economies”, the IMF said noting that even though the “likelihood of a hard landing has receded… the balance of risks to global growth remains tilted to the downside”.

Growth has lagged on account of tight monetary policies as central banks have kept money supply tight to fight inflation which rose to 8.7% in 2022. And it has logged on account of an uneven recovery from the pandemic and supply chain disruptions caused by Russia’s invasion of Ukraine. Hamas’ surprise assault on Israel last weekend threatens to destablise West Asia, a region that accounts for a third of the world’s oil production.

IMF expects inflation in 2024 to rise at 5.8%, faster than the 5.2% estimated three months and these projections do not reflect events of the weekend and their fallout.. “A fresh risk emerged in the form of the Israel-Palestinian conflict just as officials from 190 countries met in Marrakech for the IMF and World Bank annual meetings, but came after the IMF’s quarterly outlook update was locked down on Sept. 26”, a Reuters story said.

“It is too early to say how the major escalation would affect the global economy. Depending how the situation might unfold, there are many very different scenarios that we have not even yet started to explore, so we can’t make any assessment at this point yet”, IMF chief economist Pierre-Olivier Gourinchas told Reuters.

While not much has changed between the July and October editions of the WEO as far as growth in major economies is concerned, 2023 and 2024 projections signify a major downturn from 2022 performance. Global GDP growth is expected to fall by 50 basis points between 2022 and 2023 while advanced economies will grow at just 1.5% in 2023 compared to 2.6% in 2022. The Chinese economy is expected to grow at 5% in 2023, which is higher than the 3% it grew at in 2022. To be sure, this number needs to be read with the economic headwinds from China’s zero-Covid policy until last year. IMF’s October forecast for China’s 2023 and 2024 growth is 20 and 30 basis points lower than its July projections, which suggests that world’s second largest economy might be losing momentum. In fact, WEO flags China’s property sector crisis a potential downside risk for growth of emerging market and commodity exporting economies.

Apart from regular data on GDP growth projections, WEO strikes a slightly hawkish tone. “There is little margin for error on the policy front. Central banks need to restore price stability while using policy tools to relieve potential financial stress when needed…Fiscal policymakers should rebuild budgetary room for maneuver and withdraw untargeted measures while protecting the vulnerable”, IMF said in a clear call for monetary and fiscal tightening even as it highlighted the fact that global growth projections remains below the historical (2000-19) range of 3.8% and “forecasts for global growth over the medium term, at 3.1%, are at their lowest in decades, and prospects for countries to catch up to higher living standards are weak”.