July 17, 2024
The IMF has increased India's FY25 growth projection to 7% from the previous 6.8%
This upgrade reflects better-than-expected growth in 2023 and improved private consumption, particularly in rural areas
India's growth forecast for FY26 remains steady at 6.5%
The IMF noted that growth in India and China will drive nearly half of global growth in 2024.
The International Monetary Fund (IMF) has raised India’s growth projection for FY25 to 7%, up from its previous forecast of 6.8% in April, maintaining India’s status as the world’s fastest-growing economy. This latest upgrade reflects an improved outlook for private consumption, especially in rural areas, and carryover from upward revisions in 2023. The IMF’s forecast for India’s growth in FY26 remains at 6.5%.
In its World Economic Outlook Update, the IMF adjusted its growth forecast for emerging markets and developing economies to 4.3% from 4.2%, highlighting that stronger activity in Asia, particularly in China and India, is driving this increase. The IMF noted that growth in India and China will account for nearly half of global growth in 2024. Gita Gopinath, the IMF’s deputy managing director, pointed out that while the euro area growth is expected to increase, the US economy shows signs of cooling after a strong year.
India’s economy grew by 8.2% in FY24. Last month, the Reserve Bank of India (RBI) revised the country’s gross domestic product (GDP) forecast upward by 20 basis points to 7.2%. Similarly, Fitch Ratings increased India’s FY25 growth forecast to 7.2% from 7%.
The IMF maintained its global economic growth forecast at 3.2% for 2024 and 3.3% for 2025. China’s growth forecast for 2024 was revised upward to 5%, driven by a rebound in private consumption and strong exports in the first quarter. However, due to ageing and slowing productivity growth, its GDP growth is expected to slow to 4.5% in 2025 and continue decelerating to 3.3% by 2029.
The IMF emphasised the need for emerging markets and developing economies to manage the risks of currency and capital flow volatility. It advised adjusting exchange rates and using monetary policy to keep inflation close to target, while prudently using foreign reserves to deal with potential outflows. The IMF also underscored the importance of multilateral cooperation and trade, cautioning against inward and domestically-oriented policies that compromise the ability to address global challenges like climate change.
The IMF noted that while the overall risks to the global economic outlook remain balanced, near-term concerns, such as inflation driven by services disinflation and geopolitical tensions, have gained prominence. The escalation of trade tensions could further increase near-term risks to inflation by raising the cost of imported goods along the supply chain.
Source: Economic Times