IMF Raises India’s Growth Forecast to 6.5% in 2024-25
In its most recent update to the World Economic Outlook report, the International Monetary Fund (IMF) has made noteworthy adjustments to India’s economic growth forecast for the fiscal year 2024-25. The IMF has raised India’s GDP growth projection by 20 basis points, now standing at 6.5 percent, attributing this upward revision to the country’s resilient domestic demand. This positive outlook precedes the presentation of the 2024-25 interim Budget in India.
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Finance Minister Nirmala Sitharaman is anticipated to target a fiscal deficit of 5.3 percent of GDP for the upcoming fiscal year. Additionally, a Moneycontrol survey of economists indicates expectations of a nominal GDP growth rate of 10.5 percent, surpassing the statistics ministry’s initial estimate of 8.9 percent for the current fiscal year (2023-24). The statistics ministry reported a real growth rate of 7.3 percent for 2023-24, following the release of GDP data in November 2023, indicating a 7.6 percent expansion in the Indian economy from July to September.
While the Budget does not provide a forecast for real GDP growth, the finance ministry, in a report dated January 29, suggests that the Indian economy’s growth rate may hover around 7 percent in 2024-25. This optimism is attributed to the robust strength of domestic demand, driving the economy to a growth rate exceeding 7 percent over the last three years, according to a report authored by officials from the office of the Chief Economic Adviser V Anantha Nageswaran.
The Reserve Bank of India (RBI) echoes similar sentiments about India’s economic growth, although an official revision of its forecast for 2024-25 is pending, with an announcement expected on February 8, coinciding with the Monetary Policy Committee’s decision on interest rates.
While India received positive feedback from the IMF, the global growth forecast was raised only for the year 2024. The IMF’s chief economist, Pierre-Olivier Gourinchas, stated that the global economy is experiencing a gradual descent towards a soft landing, with declining inflation and sustained growth. However, uncertainties persist, and central banks face “two-sided risks,” emphasizing the need to avoid premature reduction in interest rates and to normalize monetary policies in a timely manner.
IMF’s latest global growth forecasts
Indicate varying rates across major economies, with Russia, the U.S., and China leading the upward revisions for 2024. Gourinchas emphasizes that despite positive trends, caution is necessary to prevent inflation rebounding and to ensure sustained growth. According to the IMF’s projections, consumer prices are expected to rise by 5.8 percent in 2024 and 4.4 percent in 2025, following a 6.8 percent increase in 2023.
