India's Growth Shines as IMF Raises FY25 GDP Forecast; US Prospects Dim in Global Slowdown

IMF Upgrades India's Growth Forecast

The International Monetary Fund (IMF) has raised India's growth forecast for FY25 by 20 basis points (bps) to 7%, up from 6.8%. This boost is attributed to stronger private consumption, especially in rural areas, as highlighted in the IMF’s latest World Economic Outlook (WEO) update on July 16.

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Steady Growth for India

In its April forecast, the IMF had anticipated a GDP growth rate of 6.8% for India, now revised to 7%. The estimate for FY26 remains at 6.5%. The Reserve Bank of India (RBI) also raised its GDP forecast for FY25 to 7.2% from 7%.

Historical GDP Growth:

• FY24: 8.2%

• FY23: 7.2%

• FY22: 8.7%

Global Economic Context

While India's outlook is positive, the global forecast remains tepid. The IMF projects global growth at 3.2% for 2024, unchanged from April, and down from 3.3% in 2023. This is below the pre-pandemic average of 3.8% per year.

Key Drivers in Asia

According to Gita Gopinath, First Deputy Managing Director of the IMF, India and China will account for nearly half of global growth in 2024. India continues to be the fastest-growing major economy.

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US Growth Outlook Dims

The IMF has downgraded its US growth forecast for 2024 to 2.6%, down from 2.7% in April, due to a weak first quarter and persistent inflation. Global inflation is expected to decrease from 6.7% in 2023 to 5.9% in 2024 and further to 4.4% in 2025.

Japan’s Economic Challenges

Japan’s growth forecast for 2024 has been revised downward to 0.7% from 0.9% in April, following disruptions like major automobile plant shutdowns and weak private investment. This is down from 1.9% growth in 2023.

Global Growth Outlook and Risks

The IMF's global growth forecast remains at 3.2% for 2024 and slightly up to 3.3% for 2025. Potential risks include elevated inflation, higher-for-longer interest rates, renewed geopolitical tensions, and policy uncertainty due to elections.

In summary, while India’s growth prospects are strong, the global economic outlook remains uncertain with several potential risks that could affect overall stability and growth.

Also Read: India's Wholesale Inflation Hits 16-Month High in June Amid Soaring Food Prices