IMF Maintains India’s GDP Growth at 7% for FY25, 6.5% for FY26

The International Monetary Fund (IMF) has maintained its growth projections for India, forecasting the economy to expand by 7% in FY25 and 6.5% in FY26. According to the IMF, the post-pandemic recovery, fueled by pent-up demand, has largely run its course as the economy now aligns with its potential growth trajectory. This steady outlook reflects India’s resilience amid global economic uncertainties.

India’s Growth Outlook

  • The IMF retained India’s GDP growth forecasts at 7% for FY25 and 6.5% for FY26.
  • Pent-up demand from the pandemic has largely been exhausted, as the economy reconnects with its potential growth.
  • The RBI also maintained its FY24 growth projection at 7.2%, citing strong consumption and investment momentum.

Global Growth Forecast

  • Global growth for 2024 and 2025 is expected to be 3.2%, slightly revised downward by 10 basis points (bps) from July’s projection of 3.3%.
  • Sectoral shifts indicate elevated goods prices compared to services, a lingering effect of the pandemic.
  • A global shift from goods to services consumption is underway, with India and China benefiting in manufacturing production.

Regional Insights

  • For China, the IMF revised its 2024 growth projection downward by 20 bps to 4.8%, with risks posed by a contraction in the property sector.
  • For the United States, the IMF revised its growth outlook upward by 20 bps to 2.8% for 2024.

India’s Role in Manufacturing

  • Manufacturing production is increasingly shifting towards emerging markets, particularly India and China, as advanced economies lose competitiveness.

Global Inflation Outlook

  • Global headline inflation is expected to decline from 6.7% in 2023 to 5.8% in 2024, and further to 4.3% in 2025.
  • Advanced economies are projected to meet their inflation targets sooner than emerging markets and developing economies.
  • Services inflation remains elevated globally, which may require calibrated monetary policies in response.

India’s Inflation Forecast

  • The IMF projects India’s headline inflation at 4.4% for FY25 and 4.1% for FY26.

Risks and Geopolitical Tensions

  • Ongoing geopolitical tensions could cause spikes in commodity prices, complicating efforts to manage inflation.
  • These tensions pose risks to fiscal policy and financial stability, potentially preventing central banks from easing monetary policy.

Other’s Growth Projections Rate

  • IMF – 7.0
  • S & P – 6.8
  • World Bank – 7.0
  • Moody’s – 7.1
  • RBI – 7.2

What is Pent-up Demand?

  • Pent-up demand refers to a situation where demand for a service or product is unusually strong.
  • Economists generally use the term to describe the general public’s return to consumerism following a period of decreased spending.

Summary/Static Details
Why in the news? The International Monetary Fund (IMF) has maintained its growth projections for India, forecasting the economy to expand by 7% in FY25 and 6.5% in FY26.
Post-Pandemic Recovery Pent-up demand largely exhausted, economy reconnecting with potential growth trajectory.
RBI Growth Projection FY24: 7.2% (strong consumption and investment momentum).
Global Inflation Outlook Global inflation: 2023: 6.7%, 2024: 5.8%, 2025: 4.3%. Advanced economies to meet inflation targets sooner.
India’s Inflation Forecast FY25: 4.4%, FY26: 4.1%.
Growth Projections (Other Institutions) IMF: 7.0%, S&P: 6.8%, World Bank: 7.0%, Moody’s: 7.1%, RBI: 7.2%.

Shivam

Recent Posts

National Mathematics Day 2024: Celebrating Srinivasa Ramanujan

Every year on December 22, India celebrates National Mathematics Day. This date marks the birth…

19 hours ago

Current Affairs Flash 22nd December Based Quiz

In competitive exams like SSC, Defence, State Exams, and Railways, current affairs are crucial. This…

1 day ago

Ukraine Strikes Russian High-Rises in Kazan: 9/11-like Attack

On Saturday, December 21, 2024, several explosive-laden drones, believed to be part of Ukraine's ongoing…

2 days ago

Which District of Uttar Pradesh is Known as the Moonj City?

Uttar Pradesh, one of India's most populous states, is known for its rich cultural and…

2 days ago

55th GST Council Meeting: Key Highlights and Proposals

The 55th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, convened ministers from 28…

2 days ago

24th BIMSTEC Senior Officials Meeting (SOM)

India participated in the 24th BIMSTEC Senior Officials Meeting (SOM), hosted virtually by Thailand on…

2 days ago