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The International Monetary Fund (IMF) has retained the growth projection for India at 7% for the current fiscal, in its latest World Economic Outlook report. The forecast, however, is 20 basis points (bps) lower than that of the Reserve Bank of India (RBI).
For FY26 too, the IMF has retained India’s growth outlook at 6.5%. “In India, the outlook is for GDP growth to moderate from 8.2% in 2023 (FY24), to 7% in 2024 (FY25) and 6.5% in 2025 (FY26), because pent-up demand accumulated during the pandemic has been exhausted, as the economy reconnects with its potential,” the Fund said.
Despite being lower than RBI’s estimate, the IMF is more optimistic than most economists, who have projected India’s growth to come in at 6.8% in FY25, in the backdrop of slowdown in high frequency indicators.
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On the global level, the Fund has retained its world’s economic growth projection at 3.2% for 2024, but has cut its 2025 projection by 10 bps (3.2%). It has raised the US’ growth estimate for 2024 by 20 bps to 2.8%, but has reduced China’s forecast by 20 bps to 4.8%. In 2023, the economies of both the US and China had grown by 2.8% and 4.8%, respectively.
“Risks to the global outlook are tilted to the downside amid elevated policy uncertainty,” the IMF said. Sudden eruptions in financial market volatility—as experienced in early August—could tighten financial conditions and weigh on investment and growth, especially in developing economies in which large near-term external financing needs may trigger capital outflows and debt distress, it said.
Further disruptions to the disinflation process, potentially triggered by new spikes in commodity prices amid persistent geopolitical tensions, could prevent central banks from easing monetary policy, which would pose significant challenges to fiscal policy and financial stability, it said.
Additionally, deeper- or longer-than-expected contraction in China’s property sector, especially if it leads to financial instability, could weaken consumer sentiment and generate negative global spillovers given China’s large footprint in global trade, the IMF said.
Meanwhile, the multilateral organisation has projected India’s consumer price index (CPI) inflation average 4.4% in FY25, 10 bps lower than RBI’s forecast; and Current Account Deficit at 1.1% of the GDP. In FY24, India CAD was 0.7%.
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