The International Monetary Fund (IMF) on Tuesday raised India’s GDP growth projection for 2024-25 by 30 basis points to 6.8 per cent in its update to the World Economic Outlook (WEO), citing buoyant domestic demand. However, the fund’s estimate is below the 7 per cent growth projection by the government.
“Growth in India is projected to remain strong at 6.8 per cent in 2024 (FY25) and 6.5 per cent in 2025 (FY26), with the robustness reflecting continuing strength in domestic demand and a rising working-age population,” the IMF said in its report. For India, according to the report, data and forecasts are presented on a financial year basis.
For FY24, the IMF raised India’s GDP growth projection to 7.8 per cent, compared to 6.7 per cent in its January report. For FY26, the IMF expects the country’s economic growth to slow down slightly to 6.5 per cent — the same as projected in its January update.
IMF Growth Forecast: 2024
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According to the second advance estimates by the National Statistical Office, the growth rate of GDP during 2023-24 was estimated at 7.6 per cent, compared to a growth rate of 7 per cent in 2022-23.
Rating agencies, including Fitch and Barclays, recently revised India’s GDP growth projection for FY24 to 7.8 per cent due to strong domestic demand and persistent growth in business and consumer confidence levels.
The finance ministry in its last monthly economic report (for February) said that strong growth accompanied by stable inflation and external account, and progressive employment outlook would help the Indian economy close FY24 on a positive note. “There are headwinds like indications of hardening crude oil prices and global supply chain bottlenecks to trade. Nonetheless, India, on the whole, looks forward to a bright outlook for FY25,” it said.
On inflation, the fund projected India’s consumer price inflation declining from an average of 5.4 per cent in FY24 to 4.6 per cent in FY25, and further to 4.2 per cent in FY26.
The IMF also raised its global growth projection for 2024 by 10 basis points to 3.2 per cent, saying that advanced economies are expected to see slightly faster growth, whereas emerging market and developing economies are expected to experience stable growth through 2024 and 2025, with regional differences.
“Despite many gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer sudden stops,” the IMF said.
For China, it has projected GDP growth to slow from 5.2 per cent in 2023 to 4.6 per cent in 2024, and 4.1 per cent in 2025 as the positive effects of one-off factors –– including the post-pandemic boost to consumption and fiscal stimulus –– ease and weakness in the property sector persists. IMF Chief Economist Pierre-Olivier Gourinchas, however, later said that the fund may revise China’s full-year GDP growth forecast upwards, after the country reported stronger-than-expected 5.3 per cent growth for the first quarter of 2024.
Gourinchas also said the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose. “Most indicators continue to point to a soft landing. We also project less economic scarring from the crises of the past four years… But we now estimate that there will be more scarring for low-income developing countries, many of which are still struggling to turn the page from the pandemic and cost-of-living crisis,” the IMF chief economist said.
The report also warned that while inflation trends are encouraging, “we are not there yet” and that medium-term growth prospects remained historically weak. It also stressed the need for huge global investments for a green and climate-resilient future.
First Published: Apr 16 2024 | 6:56 PM IST
