IMF hikes India’s FY25 GDP growth forecast to 7%: What it means

The International Monetary Fund ( IMF) has hiked India’s FY25 GDP growth forecast by 20 BPS to 7 per cent in comparison to  April estimate of 6.8 per cent. The IMF, In its World Economic Outlook  July update, has maintained FY26 GDP growth forecast at 6.5 per cent 

“ The forecast for growth in India has also been revised upward, to 7.0 percent, this year, with the change reflecting carryover from upward revisions to growth in 2023 and improved prospects for private consumption, particularly in rural areas,” it said in an update to the WEO.

GDP expanded at 8.2 per cent in FY24, higher than 7 per cent recorded in FY23 and aided by a greater-than-expected expansion of 7.8 per cent in the fourth quarter, according to provisional estimates released by the National Statistical Office.

The Reserve Bank of India (RBI) has projected the economy will grow at 7.2 per cent in FY25. India is at the threshold of a “major structural shift” in its growth trajectory, said RBI Governor Shaktikanta Das last month. The country is moving towards a path where annual GDP growth of 8 per cent can be sustained for long, he said.

Edge over China 

IMF is upgrading its economic outlook this year for China, India and Europe while modestly lowering expectations for the United States and Japan. However, IMF says worldwide progress against accelerating prices has been slowed by stickier-than-expected inflation for services, from airline travel to restaurant meals.

The IMF said on Tuesday that it continues to expects the world economy to grow a lackluster 3.2 per cent this year, unchanged from its previous forecast in April and down a tick from 3.3 per cent growth in 2023. From 2000 through 2019, before the pandemic upended economic activity, global growth had averaged 3.8 per cent a year.

The IMF, a 190-nation lending organisation, works to promote economic growth and financial stability and reduce global poverty. In a blog post that accompanied the latest update to its World Economic Outlook, the IMF's chief economist, Pierre-Olivier Gourinchas, wrote that China and India would account for nearly half of global growth this year.

Partly because of a surge in Chinese exports at the start of 2024, the IMF upgraded its growth forecast for China this year to 5 per cent from the 4.6 per cent it had projected in April, though down from 5.2 per cent in 2023. The IMF forecast was posted before Beijing reported Monday that the Chinese economy, the world's second-largest after the United States, had grown at a slower-than-expected 4.7 per cent annual rate from April through June, down from 5.3 per cent in the first three months of the year.

(With PTI inputs)