August 16, 2024
India’s economic growth has exceeded expectations, driven by strong private consumption and favourable monsoon conditions
India is expected to become the third-largest economy by 2027, bolstered by these positive growth trends
The recovery in rural consumption, evidenced by increased FMCG and two-wheeler sales, is a positive indicator for the economy
Improved agricultural incomes due to better monsoon harvests are expected to boost rural consumption and overall economic growth further
According to Dr Gita Gopinath, the IMF’s first deputy managing director, India’s economic growth has been stronger than anticipated. This positive outlook is attributed to a recovery in private consumption and favourable monsoon conditions, which resulted in the International Monetary Fund (IMF) revising its growth forecast for 2024-25 to 7%.
Gopinath noted that India’s growth has outperformed expectations from the last fiscal year, and these carryover effects are influencing the IMF’s optimistic forecast for the current year. She highlighted that the revival of private consumption, particularly in rural areas, significantly contributes to the country’s economic growth.
The IMF’s updated projection aligns closely with the Reserve Bank of India’s (RBI) recent forecast. During its August Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das projected a real GDP growth rate of 7.2% for the financial year 2024-25, with quarterly growth estimates ranging from 7.1% to 7.3%.
The IMF’s outlook is slightly more optimistic than the 6.5-7% growth projected in the Economic Survey 2024, which was released just before the Union Budget. Gopinath explained that the IMF’s upgraded projection is based on several factors, including a resurgence in rural consumption, as indicated by rising sales of fast-moving consumer goods (FMCG) and two-wheelers.
The favourable monsoon conditions are expected to lead to better harvests, which in turn should increase agricultural incomes and further stimulate rural consumption. This combination of factors has led the IMF to predict that India is on track to become the world’s third-largest economy by 2027, underscoring the country’s robust economic trajectory.
Source: Business Today