The International Monetary Fund (IMF) has raised its 2024-25 GDP growth forecast for India by 20 basis points to 6.5 percent, although it continues to trail expectations of Indian authorities.
At 6.5 percent, the multilateral agency’s revised growth forecast for next year is 20 basis points lower than its estimate of 6.7 percent for 2023-24. One basis point is a hundredth of a percentage point.
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Similarly, the Fund has also raised its growth forecast for 2025-26 by 20 basis points to 6.5 percent.
“Growth in India is projected to remain strong at 6.5 percent in both 2024 and 2025, with an upgrade from October of 0.2 percentage point for both years, reflecting resilience in domestic demand,” the IMF said on January 30 in an update to its World Economic Outlook report.
The upward growth revision comes ahead of the presentation of the 2024-25 interim Budget, where it is expected that the Indian finance ministry will continue to take steps to improve its finances and growth prospects. According to a Moneycontrol survey of economists, Finance Minister Nirmala Sitharaman is seen targeting a fiscal deficit of 5.3 percent of GDP for 2024-25. Meanwhile, economists see the Budget numbers assuming a nominal GDP growth of 10.5 percent for next year, higher than the statistics ministry’s first advance estimate of 8.9 percent in 2023-24.
The statistics ministry has also pegged real growth for 2023-24 at 7.3 percent following the stunning GDP data released in November 2023 which showed the Indian economy expanded by 7.6 percent in July-September.
While the Budget does not make a forecast for real GDP growth, the finance ministry said in a report on January 29 that the Indian economy’s growth rate may be close to 7 percent in 2024-25.
“The strength of the domestic demand has driven the economy to a 7 percent plus growth rate in the last three years,” the ministry said in a report authored by officials from the office of the Chief Economic Adviser V Anantha Nageswaran.
The RBI has said something similar, although it is yet to revise its official forecast for 2024-25, last made in October 2023. The central bank is expected to announce a fresh forecast for next year on February 8 when its Monetary Policy Committee details its interest rate decision.
While India got multiple thumbs-up from the IMF, the agency raised its global growth forecast only for 2024.
| IMF’s LATEST GROWTH FORECASTS | ||
| 2024 | 2025 | |
| World | 3.1% | 3.2% |
| US | 2.1% | 1.7% |
| Euro Area | 0.9% | 1.7% |
| Japan | 0.9% | 0.8% |
| UK | 0.6% | 1.6% |
| China | 4.6% | 4.1% |
| Russia | 2.6% | 1.1% |
| Brazil | 1.7% | 1.9% |
| South Africa | 1.0% | 1.3% |
“The clouds are beginning to part. 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,” Pierre-Olivier Gourinchas, IMF’s chief economist, said.
Leading the upward growth revisions for 2024 were Russia (+1.5 percent), US (+0.6 percent), and China (+0.4 percent). However, Europe is seen growing at a slower rate this year than previously thought.
Source: IMF
Gourinchas added that uncertainties remain and central banks now face “two-sided risks”. First, they must ensure there is no premature reduction in interest rates, which would undo “hard-earned credibility gains and lead to a rebound in inflation”. Second, they must also normalise monetary policies “in time”.
“Not doing so would jeopardise growth and risk inflation falling below target,” the IMF’s top economist said.
As per the IMF’s latest forecasts, consumer prices are seen rising 5.8 percent in 2024 and 4.4 percent in 2025 after having posted an increase of 6.8 percent in 2023.
| IMF’s LATEST GROWTH FORECASTS | ||
| 2024 | 2025 | |
| World | 3.1% | 3.2% |
| US | 2.1% | 1.7% |
| Euro Area | 0.9% | 1.7% |
| Japan | 0.9% | 0.8% |
| UK | 0.6% | 1.6% |
| China | 4.6% | 4.1% |
| Russia | 2.6% | 1.1% |
| Brazil | 1.7% | 1.9% |
| South Africa | 1.0% | 1.3% |
“The clouds are beginning to part. 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,” Pierre-Olivier Gourinchas, IMF’s chief economist, said.
Leading the upward growth revisions for 2024 were Russia (+1.5 percent), US (+0.6 percent), and China (+0.4 percent). However, Europe is seen growing at a slower rate this year than previously thought.
Source: IMF
Gourinchas added that uncertainties remain and central banks now face “two-sided risks”. First, they must ensure there is no premature reduction in interest rates, which would undo “hard-earned credibility gains and lead to a rebound in inflation”. Second, they must also normalise monetary policies “in time”.
“Not doing so would jeopardise growth and risk inflation falling below target,” the IMF’s top economist said.
As per the IMF’s latest forecasts, consumer prices are seen rising 5.8 percent in 2024 and 4.4 percent in 2025 after having posted an increase of 6.8 percent in 2023.
