The International Monetary Fund (IMF) raised India’s growth projection for 2024-25 (FY25) by 20 basis points (bps) to 6.5 per cent in its World Economic Outlook (WEO) update on Tuesday, citing buoyant domestic spending and improved global growth prospects. The estimate, however, falls below the 7 per cent growth projection by the Ministry of Finance (FinMin).
For FY24, the IMF raised India’s growth estimate by 40 bps to 6.7 per cent compared to its October report, which is still lower than the 7.3 per cent growth projected by the National Statistical Office earlier this month.
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“Growth in India is projected to remain strong at 6.5 percent in both 2024 (FY25) and 2025 (FY26), with an upgrade from October of 0.2 percentage point for both years, reflecting resilience in domestic demand,” the IMF said in its report.
The FinMin, in its review released on Monday, said the economy is likely to grow at or over 7 per cent for the fourth consecutive year in FY25.
“That would be an impressive achievement, testifying to the resilience and potential of the Indian economy. It augurs well for the future,” it added.
RBI Governor Shaktikanta Das, in a speech at the World Economic Forum in Davos earlier this month, had said he expected India’s GDP growth would reach 7 per cent in FY25. “Our research teams are in the process of making a comprehensive assessment for our forthcoming February 2024 monetary policy. I am saying this on the basis of the strong momentum of economic activity seen in India,” he said.
The IMF raised its global growth projection for 2024 by 20 bps to 3.1 per cent, compared to its October report, citing greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China.
However, this is still below the historical (2000–19) average global growth of 3.8 per cent, with elevated central bank policy rates to fight inflation, withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth.
For China, the IMF increased its growth forecast for 2024 by 40 bps to 4.6 per cent. “The upgrade reflects carryover from stronger-than-expected growth in 2023 and increased government spending on capacity building against natural disasters,” it reasoned.
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IMF Chief Economist Pierre-Olivier Gourinchas said Brazil, India, and Southeast Asia’s major economies continue to show great resilience, with accelerating growth.
“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. New commodity and supply disruptions could occur, following renewed geopolitical tensions, especially in the Middle East. Shipping costs between Asia and Europe have increased markedly, as Red Sea attacks reroute cargoes around Africa,” he cautioned.