The International Monetary Fund (IMF) has increased its GDP growth forecast for India for the fiscal year 2024-25 by 20 basis points to 6.5 percent. Although trailing the expectations of Indian authorities, this revision indicates a positive outlook for the Indian economy. The 6.5 percent growth projection for the upcoming fiscal year is slightly lower than the IMF’s estimate of 6.7 percent for 2023-24. The Fund has also raised its growth forecast for 2025-26 by 20 basis points to 6.5 percent.
In its update to the World Economic Outlook report, the IMF highlighted that the growth in India is expected to remain robust at 6.5 percent in both 2024 and 2025. This upward revision is attributed to the resilience in domestic demand. The announcement precedes the presentation of the 2024-25 interim Budget, where the finance ministry is anticipated to take steps to enhance financial stability and growth prospects.
As per a survey of economists, Finance Minister Nirmala Sitharaman is expected to target a fiscal deficit of 5.3 percent of GDP for 2024-25. Economists also anticipate the Budget numbers to assume a nominal GDP growth of 10.5 percent for the next year, higher than the statistics ministry’s first advance estimate of 8.9 percent in 2023-24.
While the Budget does not provide a forecast for real GDP growth, the finance ministry, in a report released on January 29, suggested that the Indian economy’s growth rate may be close to 7 percent in 2024-25. The report highlighted that the strength of domestic demand has been a key driver, leading to a growth rate exceeding 7 percent in the last three years.
The Reserve Bank of India (RBI) has also indicated a positive stance, emphasizing the strength of domestic demand. The central bank is expected to announce a fresh forecast for the next fiscal year on February 8, coinciding with its Monetary Policy Committee’s interest rate decision.
While the IMF revised its growth forecast for India, it raised global growth projections only for the year 2024. Pierre-Olivier Gourinchas, the chief economist of the IMF, stated that the global economy is on the final descent toward a soft landing, with declining inflation and sustained growth. However, uncertainties persist, and central banks face two-sided risks. They must ensure no premature reduction in interest rates, risking credibility gains, and they must also normalize monetary policies in a timely manner to avoid jeopardizing growth and falling below inflation targets.
The latest forecasts from the IMF indicate that consumer prices are expected to rise by 5.8 percent in 2024 and 4.4 percent in 2025, following a 6.8 percent increase in 2023.
