The International Monetary Fund (IMF) has raised India's growth forecast for 2024-25 to 6.8% from 6.5% on the back of strong domestic demand and a rising working-age population.

The Reserve Bank of India, the country's central bank, estimates the economy to grow at 7% in the current financial year that started on April 1.

The IMF estimates Asia's third-largest economy's gross domestic product to grow at 6.5% in the next financial year, it said in the World Economic Outlook released on Tuesday, April 16.

The agency also revised upwards the growth figure for 2023-24 to 7.8% from the 6.7% it had forecast in January. India's own official estimates had pegged growth at 7.6%.

"Global economy remains remarkably resilient, with growth holding steady as inflation returns to target," the IMF said while predicting the global real GDP growth at 3.2% for 2024 and 2025, the same rate as in 2023.

According to the second advance estimate by the National Statistical Office, the growth rate of GDP during 2023-24 was estimated at 7.6%, compared to a growth rate of 7% in 2022-23.

Rating agencies, including Fitch and Barclays, recently revised India’s GDP growth projection for FY24 to 7.8% due to strong domestic demand and persistent growth in business and consumer confidence levels.

The finance ministry in its last monthly economic report (for February) said that strong growth accompanied by stable inflation and external account, and a progressive employment outlook would help the Indian economy close FY24 on a positive note.

“There are headwinds like indications of hardening crude oil prices and global supply chain bottlenecks to trade. Nonetheless, India, overall, looks forward to a bright outlook for FY25,” it said.

On inflation, the fund projected India’s consumer price inflation declining from an average of 5.4% in FY24 to 4.6% in FY25, and further to 4.2% in FY26.

The IMF also raised its global growth projection for 2024 by 10 basis points to 3.2%, saying that advanced economies are expected to see slightly faster growth, whereas emerging market and developing economies are expected to experience stable growth through 2024 and 2025, with regional differences.

“Despite many gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer sudden stops,” the IMF said.

Asian Development Bank, last week, raised India’s growth forecast to 7% for FY25 from 6.7% projected earlier. World Bank, earlier this month, projected the Indian economy to log 6.6% growth in FY25, compared with 6.4% earlier.

For China, it has projected GDP growth to slow from 5.2% in 2023 to 4.6% in 2024, and 4.1% in 2025 as the positive effects of one-off factors –– including the post-pandemic boost to consumption and fiscal stimulus –– ease and weakness in the property sector persist.

IMF Chief Economist Pierre-Olivier Gourinchas, however, later said that the fund may revise China’s full-year GDP growth forecast upwards after the country reported stronger-than-expected 5.3% growth for the first quarter of 2024.

The IMF has upgraded its global economic outlook, anticipating a “soft landing” characterised by controlled inflation and steady growth.

Predicting a worldwide expansion of 3.2% for 2024, up from the previously forecasted 3.1%, the IMF anticipates growth matching that of 2023. This optimistic projection extends into 2025, with an expected third consecutive year of 3.2% growth. Notably, the IMF attributes much of this expansion to robust growth in the United States, forecasting a 2.7% increase for 2024, up from the earlier 2.1% prediction.

Article Sources – Reuters, Business Standard