The International Monetary Fund (IMF) on Tuesday raised India’s growth projection for FY25 by 20 basis points to 7 per cent, citing “improved prospects” for private consumption, particularly in rural areas.
The IMF expects gross domestic product (GDP) growth in FY26 to slow down to 6.5 per cent, same as projected in its April World Economic Outlook (WEO). “The forecast for growth in India has also been revised upward, to 7.0 percent, this year, with the change reflecting carryover from upward revisions to growth in 2023 and improved prospects for private consumption, particularly in rural areas,” it said in an update to the WEO.
GDP expanded at 8.2 per cent in FY24, higher than 7 per cent recorded in FY23 and aided by a greater-than-expected expansion of 7.8 per cent in the fourth quarter, according to provisional estimates released by the National Statistical Office.
The Reserve Bank of India (RBI) has projected the economy will grow at 7.2 per cent in FY25. India is at the threshold of a “major structural shift” in its growth trajectory, said RBI Governor Shaktikanta Das last month. The country is moving towards a path where annual GDP growth of 8 per cent can be sustained for long, he said.
The IMF report upgraded the growth forecast for China for the calendar year 2024 by 40 basis points to 5 per cent on account of a rebound in private consumption and strong exports in the first quarter. On a calendar-year basis, India’s growth projections are 7.3 per cent in 2024 and 6.5 per cent in 2025.
IMF chief economist Pierre-Olivier Gourinchas said that 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,” said Gourinchas in a blog post.
IMF’s global growth projections are unchanged at 3.2 per cent for the calendar year 2024 and slightly higher at 3.3 per cent in 2025.
The IMF has predicted global inflation to slow to 5.9 per cent in 2024 from 6.7 per cent last year, broadly on track for a soft landing.
“The good news is that, as headline shocks receded, inflation came down without a recession. The bad news is that energy and food price inflation are now almost back to pre-pandemic levels in many countries, while overall inflation is not,” said Gourinchas.
First Published: Jul 16 2024 | 6:31 PM IS