India is poised to remain the fastest growing economy in the world. The IMF has kept India’s growth projection unchanged at 7% for FY2024-25 and 6.5% for FY26. While global growth projections continue to remain at 3.2% for both FY24 and FY25.
According to the IMF’s WEO, “In India, the outlook is for GDP growth to moderate from 8.2% in 2023 to 7% in 2024 and 6.5% in 2025, because pent-up demand accumulated during the pandemic has been exhausted, as the economy reconnects with its potential.”
The agency has also upgraded its forecast for United States to 2.8% in 2024 and 2.2% in 2025. This is an upgrade from the earlier forecast of 2.6% and 1.9% in its July outlook. However, China’s growth forecast has been lowered to 4.8% in 2024 from the earlier 5%.
It stated, “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 IMF also pointed out the increasing disruptions and tensions in the Middle East and how it threatens overall trade. It noted, “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.”
However, for India, the IMF projects headline inflation of 4.4% in FY25 and 4.1% for FY26. Meanwhile RBI estimates the Indian economy to grow at 7.2% in FY25 on account of strong domestic demand. Earlier in June, the World Bank had raised India’s growth forecast for this year by 20 basis points to 6.6%. It had cited strong growth momentum as the reason for an upgrade.
India-‘Fastest Growing Economy’
According to the IMF’s director of Asia Pacific department, Mr. Krishna Srinivasan, India will continue to remain the fastest growing economy in the world. In an interview to PTI he stated, “India is expected to remain the fastest-growing economy in the world. We project growth at seven percent in FY24-25, supported by a recovery in rural consumption, as there have been favorable harvests.”