IMF upgrades India’s FY25 GDP growth forecast to 7%

The International Monetary Fund (IMF) has upgraded India's GDP forecast by 0.2 basis points to 7% for 2024-25, driven by improved private consumption.

"The forecast for growth in India has also been revised upward, to 7.0 per cent, this year, with the change reflecting carryover from upward revisions to growth in 2023 and improved prospects for private consumption, particularly in rural areas," says IMF in its July 2024 World Economic Outlook Update.

The IMF has kept India's real GDP projections unchanged for the next fiscal year (2025-26) at 6.5%. The economic forecast by the IMF is largely in line with the forecast of the Reserve Bank of India (RBI), which in its June 7, 2024, monetary policy committee meeting, revised the country's growth forecast to 7.2% in FY25, with Q1 at 7.3%; Q2 at 7.2%; Q3 at 7.3%; and Q4 at 7.2%.

The latest update projects global growth of 3.2% in 2024 and 3.3% in 2025 with the disinflation process stalling. The IMF's forecast for global economic growth is broadly unchanged from that in April. "However, varied momentum in activity at the turn of the year has somewhat narrowed the output divergence across economies as cyclical factors wane and activity becomes better aligned with its potential. Services price inflation is holding up progress on disinflation, which is complicating monetary policy normalisation," says the IMF.

The Washington, D.C.-based global financial agency says the projected increase in its real GDP growth projections in emerging market and developing economies is powered by stronger activity in Asia, particularly China and India.

For China, the growth forecast is revised upward to 5% in 2024, primarily on account of a rebound in private consumption and strong exports in the first quarter. In 2025, GDP is projected to slow to 4.5% and to continue to decelerate over the medium term to 3.3% by 2029, because of headwinds from ageing and slowing productivity growth.

The real GDP growth in emerging and developing Asia will be the highest among all the regions at 5.4% in 2024 and 5.1% in 2025, says the IMF.

Among advanced economies, in the United States, projected growth is revised downward to 2.6% in 2024 (0.1 percentage point lower than projected in April), reflecting the slower-than-expected start to the year. Growth is expected to slow to 1.9% in 2025 as the labour market cools and consumption moderates, with fiscal policy starting to tighten gradually.

By the end of 2025, growth (in the US) is projected to taper to potential, closing the positive output gap, says the IMF.

Overall, the IMF says, risks to the outlook remain balanced, as in the April 2024 WEO, but some near-term risks have gained prominence. “These include upside risks to inflation…higher nominal wage growth if accompanied by weak productivity, could make it difficult for firms to moderate price increases. The escalation of trade tensions could further raise near-term risks to inflation. Bumpiness along the remaining disinflation path could destabilise the return to price stability.”