IMF keeps India’s GDP growth forecast at 7% for FY25 and 6.5% for FY26

The International Monetary Fund (IMF) has confirmed its growth forecasts for India, projecting a GDP growth of 7 per cent for the financial year 2024 and 6.5 per cent for FY25. This assessment highlights that the pent-up demand accumulated during the pandemic has been largely exhausted as the economy “reconnects” with its potential. In its latest World Economic Outlook report, the IMF stated, “In India, the outlook is for gross domestic product (GDP) growth to moderate from 8.2 per cent in 2023 to 7 per cent in 2024 and 6.5 per cent in 2025.” This adjustment reflects a transition as the economy stabilises following the post-pandemic surge.

Earlier this month, the Reserve Bank of India ( RBI ) also maintained its growth projection for the current financial year at 7.2 per cent, attributing this stability to robust consumption and investment momentum.
On a global scale, the IMF's growth projections remain largely unchanged from earlier estimates in July, with global growth expected to stabilise at a lacklustre 3.2 per cent for both 2024 and 2025. However, the forecast for 2025 has been marginally revised down by 10 basis points from the previously projected 3.3 per cent.

The report notes significant sectoral and regional shifts driving the stable global outlook, particularly the ongoing transition from goods to services consumption. Emerging markets like India and China are gaining ground in manufacturing production, which is boosting activity in the services sector while dampening manufacturing output in advanced economies. For China, the IMF has revised its 2024 growth projection downwards by 20 basis points to 4.8 per cent, while the outlook for the United States has been raised by 20 basis points to 2.8 per cent. The report warns that a prolonged contraction in China's property sector could weaken consumer sentiment and have negative global repercussions, given China's significant role in international trade.

On the inflation front, global headline inflation is anticipated to decrease from an average of 6.7 per cent in 2023 to 5.8 per cent in 2024 and further to 4.3 per cent in 2025. Advanced economies are expected to return to their inflation targets sooner than emerging markets. However, elevated services price inflation remains a concern in many regions, complicating monetary policy decisions. For India, the IMF projects a headline inflation rate of 4.4 per cent for FY25 and 4.1 per cent for FY26. The report emphasises the need for structural reforms to enhance medium-term growth prospects, advocating for early engagement with stakeholders such as trade unions and business associations to ensure the social acceptability of these reforms.

The outlook cites successful reforms in Indian states like Gujarat and Rajasthan, which have implemented flexible labour laws and skill development initiatives, as potential models for national policy changes.