IMF Sticks To 7 Per Cent Growth Forecast For India In 2024-25; Lowers China's Outlook, Raises US Projection

The International Monetary Fund (IMF) on Tuesday maintained its projection for India’s Gross Domestic Product (GDP) growth at 7 per cent for the current fiscal year ending 31 March 2025. The latest estimates, published in the IMF’s World Economic Outlook (WEO), also forecast India’s growth rate to moderate to 6.5 per cent in the fiscal year 2025-26.

“In India, the outlook is for GDP growth to moderate from 8.2 per cent in 2023 to 7 per cent in 2024 and 6.5 per cent in 2025, because pent-up demand accumulated during the pandemic has been exhausted, as the economy reconnects with its potential,” the IMF said in the World Economic Outlook.

Global growth remains steady at 3.2 per cent for both 2024 and 2025.

The report also updated the forecast for the US, raising its 2024 growth estimate to 2.8 per cent, up from the previous forecast of 2.6 per cent, and its 2025 projection to 2.2 per cent, compared to the July estimate of 1.9 per cent. 

However, China’s growth outlook for 2024 was lowered to 4.8 per cent from 5 per cent, with no change to the 2025 projection of 4.5 per cent.

“Deeper or longer-than-expected contraction in China’s property sector, especially if it leads to financial instability, could weaken consumer sentiment. It could generate negative global spillovers, given China’s large footprint in global trade,” the outlook noted. 

The outlook from the Washington-based organization of 190 countries was a mixed bag for the global economy with optimism on inflation but warnings over debt levels and increasing geopolitical and trade volatility.

The outlook noted that global headline inflation is expected to fall from an annual average of 6.7 per cent in 2023 to 5.8 per cent in 2024 and 4.3 per cent in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies.

In particular, the IMF said continued tensions in the Middle East threaten commodity prices and overall trade in the region.

“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. This would pose significant challenges to fiscal policy and financial stability,” the outlook added. 

“It looks like the global battle against inflation has largely been won, even if price pressures persist in some countries,” IMF chief economist Pierre-Olivier Gourinchas said.

For India, the October outlook projects a headline inflation figure of 4.4 per cent for Financial Year (FY)25 and 4.1 per cent for Financial Year (FY)26.

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