NEW DELHI: The International Monetary Fund (IMF) on Tuesday raised India’s growth forecast for FY25 to 6.5%, from 6.3% projected earlier, saying domestic demand resilience will help carry forward growth momentum, while lifting its global economic outlook as well.
“Growth in India is projected to remain strong at 6.5% in 2024 and 2025, with an upgrade from October of 0.2 percentage point for both years, reflecting resilience in domestic demand,” it said in the latest update of the World Economic Outlook. IMF estimates the Indian economy to grow 6.7% this fiscal, lower than the 7.3% official projection by the country’s statistical body. Its FY25 estimate is also lower than the finance ministry’s near-7% growth projection.
The multilateral body revised global economy growth forecast to 3.1% for 2024, from 2.9% in its October update, saying it is headed for a ‘soft landing’. It projected global growth to rise marginally to 3.2% in 2025. “The global economy begins the final descent toward a soft landing, with inflation declining steadily and growth holding up,” said Pierre-Olivier Gourinchas, chief economist at IMF.
“But the pace of expansion remains slow, and turbulence may lie ahead,” said IMF’s Gourinchas.
The finance ministry’s economic review released on Monday cited robust domestic demand and the government’s supply side measures — taken to provide impetus to economic activity — to predict around 7% growth this fiscal.
“It is one thing for India to grow at 8-9% when the world economy is growing at 4%, but it is another thing to grow at or above 7% when the world economy is struggling to grow at 2%,” chief economic advisor V Anantha Nageswaran noted in the ministry’s report released ahead of the interim budget scheduled to be tabled on Thursday.
IMF, in its World Economic Outlook, noted that though risks to the global economy have moderated, and artificial intelligence (AI) could boost investment and productivity, renewed geopolitical tensions could still upend growth.
“Shipping costs between Asia and Europe have increased markedly, as Red Sea attacks reroute cargoes around Africa. While disruptions remain limited so far, the situation remains volatile,” it said. The agency also pointed out that fiscal consolidation may get delayed in 2024-25 “as many countries face rising calls for increased public spending, in what is the biggest global election year in history.”
IMF noted that central banks would need to time easing of rates perfectly to avoid further slowdown. “They must avoid premature easing that would undo many hard-earned credibility gains and lead to a rebound in inflation. It will be equally important to pivot toward monetary normalization in time,” it said.
In India, economists expect a rate cut of 0.25 percentage point by the Reserve Bank of India’s Monetary Policy Committee in its June or August policy meeting.
Source: The Economic Times
The post IMF Sees Higher India Growth Of 6.5 Per Cent Next Fiscal first appeared on Latest India news, analysis and reports on IPA Newspack.