IMF raises India’s FY25 growth projection to 6.8%

THE INTERNATIONAL Monetary Fund (IMF) has raised its forecast for India’s GDP growth in FY24 by a steep 110 basis points( bps) to 7.8 per cent. This is even higher than the expansion rate of 7.6 per cent projected by the National Statistical Office (NSO) in its second advance estimate. The IMF also revised upwards the FY25 GDP growth projection for the country by 30 bps to 6.8 per cent and retained the forecast for FY26 at 6.5 per cent.

To justify the upward revisions, the IMF cited “the robustness reflecting continuing strength in domestic demand and arisingworking-agepopulation”.

The IMF forecast for FY25 is, however, still 20 bps lower than the Reserve Bank of India’s (RBI) projection of 7 per cent for the year. Finance minister Nirmala Sitharaman had last month said Gdp may have grown above 8 per cent in FY24 due to the impact of “improved inflation management” and “macroeconomic stability”. in the current financial year (Fy 25), the fund expect sc pi inflation in India to average 4.6 per cent, slightly higher than the 4.5 percent projection of r bi, and current account deficit( CAD) to average 1.4 percent of the GDP against 1.2 per cent in FY24.

The IMF expects the world economy to grow 3.2 per cent in both 2024 and 2025. for 2024, the Fund has raised its projection by 10 bps, and for 2025, it has kept it unchanged.

In 2024, the multilateral agency sees the US economy growing by 2.7 per cent – 60 bps more than its previous forecast – and China’s economy by 4.6 per cent, unchanged from its earlier projection.

IMF’S chief economist Pierreolivier Gourinchas said growth this year and the next will hold steady at 3.2 per cent, with median headline inflation declining from 2.8 per cent at the end of 2024 to 2.4 per cent at the end of 2025. “Most indicators continue to point to a soft landing. We also project less economic scarring from the crises of the past four years, although estimates vary across countries,” he said.

On price pressures, G our inc has said bringing inflation back to target should remain the priority of economies. “Most of the good news on inflation came from the decline in energy prices and in goods inflation. But oil prices have been rising recently in part due to geopolitical tensions and services inflation remains stubbornly high,” he said.

According tot heimf, goods inflation has ebbed due to easing supply-chain frictions as well as by the decline in Chinese export prices. But further trade restrictions on Chinese exports could also push it up in the coming months.

Further, the IMF report highlights a “troubling development” –the widening divergence between many low-income developingcountries and there st of the world. For these economies, growth is revised downward whereas inflation is revised up.

“Worse, in contrast with most other regions, scarring estimates for low-income developing countries, including some large ones, have been revised up, suggesting that the poorest countries are still unable to turn the page from the pandemic and cost-of-living crisis,” the report said.

IMF headquarters in Washington.