The International Monetary Fund raised its forecast for India's economic growth on Tuesday, stating that India will continue to maintain strong growth in 2023 and 2024, but analysts warn that it will face headwinds in the future.
According to the latest IMF World Economic Outlook report, the Indian economy is expected to grow by 6.3% in 2023, higher than the previous forecast of 6.1%.
Economists are also optimistic about India's economic growth, attributing it to increased consumption, infrastructure spending, and the establishment of more businesses. However, they say geopolitical risks and inflation concerns will be a challenge.
Although the IMF has maintained its forecast for India's economic growth in 2024 at 6.3%, economists predict that India will face a series of unfavorable factors.
Alicia Garcia Herrero, Chief Economist for Asia Pacific at Natixis, warned that "the main obstacles facing India will be the widening current account deficit, rising inflation, and increased geopolitical tensions
The economist said that although the pre election environment in India is very conducive to economic growth, the loose monetary policy of the Indian Central Bank will "create problems in the future".
She said, "India's productivity has not increased to the level necessary to maintain long-term sustainable growth. But this will only become a problem in the next 20 years, not an urgent issue
Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company in India, pointed out that heatwaves and droughts have caused water levels in reservoirs in southern India to be below the 10-year average, which has had a negative impact on agriculture and rural recovery.
Due to the tense situation between India and Canada, as well as the attacks by the Palestinian militant group Hamas on Israel, geopolitical tensions are intensifying.
Shah said, "More than 80% of India's oil consumption is imported, so the rise in oil prices will have a negative impact on India's trade and fiscal deficit, inflation, and economic growth
Although economists remain optimistic about India's economic growth, Garcia Erero emphasized the importance of foreign investment in maintaining economic development.
She said, "India needs more foreign investment to create more manufacturing employment opportunities