The International Monetary Fund (IMF) has upheld its growth projections for India in its latest World Economic Outlook (WEO) report released on Tuesday. The IMF anticipates India’s economy to expand by 7% in the current fiscal year ending March 31, 2025, and projects a growth rate of 6.5% for the following fiscal year, FY2025-26.
“In India, the outlook is for GDP growth to moderate from 8.2% in 2023 to 7% in 2024 and 6.5% in 2025, because pent-up demand accumulated during the pandemic has been exhausted as the economy reconnects with its potential,” the IMF stated in the report.
Global Economy Faces Medium-Term Slowdown
Beyond the immediate forecasts, the IMF warns of a sluggish period for the global economy in the medium term. The organization emphasized the need for comprehensive reforms during the annual meetings of the IMF and the World Bank in Washington D.C.
The IMF’s Chief Economist, Pierre-Olivier Gourinchas, expressed concerns over increasing geopolitical tensions and trade volatility. “It looks like the global battle against inflation has largely been won, even if price pressures persist in some countries,” Gourinchas said.
Mixed Outlook for Major Economies
While maintaining overall global growth at 3.2% for both this year and the next, the IMF made notable adjustments to individual country forecasts:
- United States: The growth forecast for the U.S. in 2023 has been raised to 2.8% from the previous 2.6% estimate in July. The projection for 2025 has also increased to 2.2% from 1.9%. Gourinchas highlighted, “Strong growth forecast has come along with progress on inflation. There is strong productivity growth when we look at the U.S.”
- China: The growth rate for China has been revised downward to 4.8% from the earlier estimate of 5% for this year, while the 2025 projection remains steady at 4.5%.
Risks from Geopolitical Tensions
The IMF cautioned that ongoing tensions in the Middle East could disrupt commodity prices and trade flows, posing additional risks to the global economic outlook. “Continued tensions threaten commodity prices and overall trade in the region,” the report noted.
Call for Reforms
Amid these challenges, the IMF is calling for a series of reforms to bolster economic resilience. The organization stressed the importance of addressing high debt levels and mitigating geopolitical risks to ensure sustainable growth.
India’s Path Forward
For India, the moderation in growth is attributed to the diminishing effects of pent-up demand following the pandemic. As the economy aligns with its full potential, policymakers are encouraged to focus on structural reforms that can sustain long-term growth.
