IMF boosts India’s FY25 growth forecast to 7%

The International Monetary Fund (IMF) has revised India’s growth forecast for FY25 upward to 7%, citing stronger private consumption, particularly in rural areas. This adjustment comes amid varied economic projections for global markets, with notable updates for China, Europe, and the United States.

The International Monetary Fund (IMF) has increased India’s growth forecast for FY25 to 7%, a 20 basis point rise from its April estimate. This adjustment, detailed in the IMF’s July World Economic Outlook (WEO), reflects enhanced prospects for private consumption, especially in rural areas. The IMF also predicts that India’s GDP growth will decelerate to 6.5% in FY26, aligning with its previous forecast from April.

In comparison, the Reserve Bank of India (RBI) in June projected a slightly higher economic growth rate of 7.2% for FY25. RBI Governor Shaktikanta Das recently noted that India is approaching a significant structural shift in its growth trajectory.

The IMF has upgraded its 2024 economic outlook for China, India, and Europe, while slightly lowering its expectations for the United States and Japan. The organization highlighted that global progress against rising prices has been hampered by persistent inflation in services such as airline travel and dining out.

Globally, the IMF maintains its forecast for economic growth at a modest 3.2% this year, unchanged from its April projection and slightly down from 3.3% in 2023. From 2000 to 2019, before the pandemic disrupted economic activities, the global economy grew at an average annual rate of 3.8%.

In a blog accompanying the WEO update, IMF Chief Economist Pierre-Olivier Gourinchas emphasized that China and India will contribute nearly half of the world’s growth this year. China’s growth forecast for 2024 has been raised to 5% from 4.6%, driven by a surge in exports earlier in the year, although it remains below the 5.2% growth seen in 2023. This forecast preceded China’s announcement of a slower-than-expected 4.7% annual growth rate for the second quarter, down from 5.3% in the first quarter.

The IMF noted signs of economic recovery in Europe, which has been struggling with high energy costs and the fallout from Russia’s 2022 invasion of Ukraine. The growth forecast for the eurozone has been slightly increased to 0.9% for 2024, up from 0.5% in 2023, owing to a rise in services.

In contrast, the United States saw its growth forecast for this year reduced to 2.6% from the previous 2.7%, following a weak first quarter. Similarly, Japan’s 2024 growth projection has been downgraded to 0.7% from 0.9%, attributed to disruptions in automobile production in the first quarter.

After peaking at 8.7% in 2022 as the global economy rebounded from the pandemic, worldwide inflation is expected to decline from 6.7% in 2023 to 5.9% this year and further to 4.4% by 2025.