IMF raises India’s FY24 growth forecast to 6.7% from earlier 6.3%

The International Monetary Fund (IMF) raised its gross domestic product (GDP) growth forecast for India in the current fiscal to 6.7% from 6.3% earlier, while projecting a steady 6.5% growth in each of the next two years.

“Growth in India is projected to remain strong at 6.5% in both 2024 and 2025, with an upgrade from October of 0.2 percentage point for both years, reflecting resilience in domestic demand,” IMF said in its World Economic Outlook.

Despite the upward revision, the IMF’s forecast of 6.7% GDP growth for India in FY24 is below the Reserve Bank of India’s estimate of 7% and the government’s projection of 7.3%.

India’s GDP had expanded by 7.2% in FY23, and the economy had grown by a robust 7.7% in the first half of the current fiscal.

The Indian government, in its report released this week titled ‘Indian Economy—A Review,’ is optimistic about surpassing the IMF’s projections, anticipating a GDP growth closer to 7% in FY25.

The report sees India becoming the third-largest economy globally, with a projected GDP of $5 trillion in the next three years.

Global growth to stabilize at 3%

On the global front, the IMF’s report outlines a positive outlook for the second half of the previous year, citing resilient global activity supported by demand and supply factors.

Despite uncertainties, global growth is expected to stabilize at 3.1% in the current year, with a slight increase to 3.2% in the following year, it said.

The report also delved into inflation trends, noting a more rapid-than-expected decline in most regions, credited to the resolution of supply-side issues and the implementation of tighter monetary policies.

Global headline inflation is expected to fall from an estimated 6.8% in 2023 to 5.8% in 2024 and 4.4% in 2025.

Advanced economies are expected to see faster disinflation, with inflation falling by 2 percentage points in 2024 to 2.6%, than emerging market and developing economies.

IMF chief economist Pierre-Olivier Gourinchas said the world economy seems to be heading towards a “gentle slowdown” marked by diminishing inflation and consistent growth.

“The clouds are beginning to part. The global economy begins the final descent toward a soft landing, with inflation declining steadily and growth holding up. But the pace of expansion remains slow, and turbulence may lie ahead,” he said.

IMF forecasts that growth in emerging and developing Asia is expected to decline from an estimated 5.4% in 2023 to 5.2% in 2024 and 4.8% in 2025, with an upgrade of 0.4 percentage point for 2024 over the October 2023 projections, attributable to China’s economy.

Growth in China is projected at 4.6% in 2024 and 4.1% in 2025, with an upward revision of 0.4 percentage point for 2024.

In the US, growth is projected to fall from 2.5% in 2023 to 2.1% in 2024 and 1.7% in 2025.

Euro area growth is expected to rise from 0.5% in 2023 amid the Ukraine war to 0.9% in 2024 and 1.7% in 2025