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The International Monetary Fund (IMF) has revised India’s growth forecast for the fiscal year 2024-25 (FY25), raising it by 20 basis points to 7% from the previous 6.8%.
This update, released on Tuesday, July 16, highlights improved private consumption, particularly in rural areas, as a significant factor driving this upward revision.
Consistent Growth Estimates
In addition to the revised forecast for FY25, the IMF has adjusted India’s GDP growth projection for 2024 to 6.8%, up from the 6.5% estimated in April. The forecast for 2025-26 (FY26) remains unchanged at 6.5%.
The IMF’s report underscores India’s status as Asia’s third-largest economy and the fastest-growing major economy in the region.
Global Economic Outlook
Globally, the IMF maintains a cautious outlook, predicting a growth rate of 3.2% for the world economy this year, consistent with its April forecast.
This is a decline from the 3.3% growth seen in 2023 and below the pre-pandemic average of 3.8% per year from 2000 to 2019.
Asia’s Economic Powerhouses
“Growth in India and China will account for nearly half of global growth in 2024,” stated Gita Gopinath, First Deputy Managing Director of the IMF.
India’s GDP growth rate was reported at 8.2% for FY24, following 7.2% in 2022-23 and 8.7% in 2021-22. The Reserve Bank of India (RBI) has also increased its GDP forecast for FY25 to 7.2% from the previously estimated 7%.
China’s growth forecast has been upgraded to 5% from the earlier 4.6%, despite a lower-than-expected 4.7% growth rate in the second quarter. The IMF projects a slowdown in China’s growth to 3.3% by 2029 due to challenges such as a collapsing housing market and an aging population.
Japan and the Global Growth Outlook
The IMF has revised Japan’s growth forecast for 2024 down to 0.7% from 0.9%, reflecting disruptions from an automobile plant shutdown and weak private investment.
The global economy is anticipated to experience modest growth, with the IMF maintaining its 2024 real GDP growth forecast at 3.2% and slightly increasing its 2025 forecast to 3.3%.
Inflation and Economic Risks
Worldwide inflation, which surged to 8.7% in 2022, is expected to ease to 5.9% this year and further to 4.4% in 2025. However, the IMF has lowered its forecast for US growth this year to 2.6% from 2.7% due to a weak first quarter.
The IMF cautioned about persistent inflation risks, particularly in the services sector, and potential disruptions from renewed trade and geopolitical tensions. “The risk of elevated inflation has raised the prospects of higher-for-even-longer interest rates,” the IMF warned, highlighting the increased external, fiscal, and financial risks. Additionally, the IMF noted the potential impact of numerous elections this year on global economic policies.
