IMF raises India’s growth forecast FY25 to 7%

The International Monetary Fund has raised its growth projections for India in the current fiscal to 7% from its earlier projection of 6.8%. 

“The forecast for growth in India has been revised upward, to 7%, this year, with the change reflecting carryover from upward revisions to growth in 2023 and improved prospects for private consumption, particularly in rural areas,” the IMF said in its July edition of the World Economic Outlook (WEO) update.

In its April projection, the IMF had said India’s economy was forecast to expand at 6.8%. 

According to the IMF update, the global economy is projected to grow at 3.2% in 2024 and 3.3% in 2025, in line with its April 2024 forecast. 

“Growth is expected to remain stable. At 3.2% in 2024 and 3.3% in 2025, the forecast for global economic growth is broadly unchanged from that in April. Under the hood, however, offsetting growth revisions have shifted the composition,” the WEO said. 

“In China, resurgent domestic consumption propelled the positive upside in the first quarter, aided by what looked to be a temporary surge in exports belatedly reconnecting with last year’s rise in global demand. These developments have narrowed the output divergences somewhat across economies, as cyclical factors wane and activity becomes better aligned with its potential,” the report said. 

Services price inflation is holding up progress on disinflation, which is complicating monetary policy normalization. Upside risks to inflation have thus increased, raising the prospect of higher-for-even-longer interest rates, in the context of escalating trade tensions and increased policy uncertainty.

To manage these risks and preserve growth, the policy mix should be sequenced carefully to achieve price stability and replenish diminished buffers, the report added. 

“Growth in major advanced economies is becoming more aligned as output gaps are closing. The United States shows increasing signs of cooling, especially in the labour market, after a strong 2023. The euro area, meanwhile, is poised to pick up after a nearly flat performance last year,” Pierre-Olivier Gourinchas, economic counsellor and the director of research of the IMF, said. 

“Asia’s emerging market economies remain the main engine for the global economy. Growth in India and China is revised upwards and accounts for almost half of global growth. Yet prospects for the next five years remain weak, largely because of waning momentum in emerging Asia. By 2029, growth in China is projected to moderate to 3.3%, well below its current pace,” he said.