The International Monetary Fund (IMF) on Tuesday raised India’s Gross Domestic Product (GDP) growth projection for financial year 25 (FY25) by 30 basis points to 6.8 per cent in its update to the World Economic Outlook (WEO), amid buoyant domestic demand. However, the IMF’s estimate is below the seven per cent growth projection by the government.
“Growth in India is projected to remain strong at 6.8 per cent in 2024 (FY25) and 6.5 per cent in 2025 (FY26), with the robustness reflecting continuing strength in domestic demand and a rising working-age population,” the IMF said in its report.
For FY24, the IMF has raised India’s GDP growth projection to 7.8 per cent compared to 6.7 per cent in its January report. In FY26, the IMF expects the growth to slow down to 6.5 per cent, the same as projected in its January update.
IMF Growth Forecast: 2024
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The growth rate of GDP, according to the second advance estimates by the National Statistical Office, during 2023-24 is estimated at 7.6 per cent as compared to the growth rate of seven per cent in 2022-23.
Rating agencies including Fitch and Barclays had recently revised India’s GDP growth projection for FY24 to 7.8 per cent due to strong domestic demand and persistent growth in business and consumer confidence levels, in line with the IMF’s latest forecast.
The Finance Ministry in its last monthly economic report for February said that strong growth accompanied by stable inflation, an external account, and a progressive employment outlook would help the Indian economy close FY24 on a positive note.
“There are headwinds like indications of hardening crude oil prices and global supply chain bottlenecks to trade. Nonetheless, India, on the whole, looks forward to a bright outlook for FY25,” it said.
On inflation, the IMF has projected India’s consumer price inflation declining from an average of 5.4 per cent in FY24 to 4.6 per cent in FY25, and further to 4.2 per cent in FY26.
The IMF raised its global growth projection for 2024 by ten basis points to 3.2 per cent. The IMF said that advanced economies are expected to see growth rise slightly, whereas emerging market and developing economies are expected to experience stable growth through 2024 and 2025, with regional differences.
“Despite many gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer sudden stops,” the IMF said.
For China, the IMF has projected the GDP growth to slow from 5.2 per cent in 2023 to 4.6 per cent in 2024 and 4.1 per cent in 2025 as the positive effects of one-off factors—including the post-pandemic boost to consumption and fiscal stimulus—ease and weakness in the property sector persists.
IMF Chief Economist Pierre-Olivier Gourinchas said that despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose.
“Most indicators continue to point to a soft landing. We also project less economic scarring from the crises of the past four years… But we now estimate that there will be more scarring for low-income developing countries, many of which are still struggling to turn the page from the pandemic and cost-of-living crisis,” Gourinchas said.
The IMF’s report also warned that while inflation trends are encouraging, we are not there yet and that medium-term growth prospects remained historically weak. The report also stressed the need for huge global investments for a green and climate-resilient future.
First Published: Apr 16 2024 | 6:56 PM IST
