China and India together are forecast to generate about half of global growth this year, according to the International Monetary Fund's (IMF) latest 'Regional Economic Outlook' report.

The report says Asia will contribute about 70% of global growth this year, a much greater share than in recent years, and the growth in Asia and the Pacific is forecast to accelerate to 4.6% in 2023 from 3.8% last year.

The IMF's latest Regional Economic Outlook describes the resilience of the world’s most dynamic region and the important challenges facing its policymakers.

The IMF data shows that of the projected share of global growth in 2023, China alone will contribute around 34.9%, followed by India at 15.4%. Asia and the Pacific will contribute to around 67.4% of the global growth. The western hemisphere is forecast to add 13.7%, followed by the Middle East at 7.8%, Europe at 7.1%, and Africa at 4%.

The IMF in April had slashed India’s gross domestic product growth forecast to 5.9% for the financial year 2023-24, down 20 basis points compared with 6.1% projected earlier. The World Bank also lowered India’s growth forecast to 6.3% for FY24 from 6.6% citing lower consumption growth and challenging external conditions.

The IMF report also highlights China's full-scale reopening after the long Covid-induced lockdown, which, it said, has been the main development. Surging consumption in China is boosting growth across the region despite weaker demand from the rest of the world.

However, China is expected to see a slowdown. "In the longer term, the Chinese economy that has been the primary engine of regional and global growth for decades is expected to slow considerably in the face of unfavorable demographics and a productivity slowdown," says the IMF.

The IMF says risks to the outlook include spillovers from greater-than-expected US monetary policy tightening and supply chain disruptions associated with geoeconomic fragmentation.

The IMF note, written jointly by Thomas Helbling, Shanaka J. Peiris, Krishna Srinivasan, says while Asia’s financial systems haven’t seen major impacts following recent banking turmoil in the United States and Europe, they need to be carefully monitored given high leverage among households and corporates.

China, says the IMF, should prioritise structural reforms to boost long-term growth, including through innovation and digitalisation, while accelerating the green energy transition.

As per the government, India's economy is on course to grow at 7% in FY23. Global organisations such as IMF and World Bank have projected the country to be one of the fastest-growing economies in the world, though both have slashed the growth forecasts amid global downturn. The RBI has also projected that India's economic activity remains resilient and the higher rabi production has brightened the prospects for the agriculture sector and rural demand.

The latest paper published by the IMF had also said that 'India’s Digital Journey' holds lessons for other countries embarking on their own digital transformation, in particular a design approach that focuses on shared building blocks and supporting innovation across the ecosystem. The paper said India has developed a world-class digital public infrastructure to support its sustainable development goals.

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