IMF retains India’s growth projection at 7% for FY25

Last Updated24/10/2024

The multilateral lender expected India to grow at 7% in the current fiscal year ending March 31, 2025 and 6.5% in the next fiscal year (FY2025-26). World output was expected to grow at 3.2% in 2024 as well as 2025.

In its latest World Economic Outlook (WEO), released on October 22, 2024, during the World Bank and IMF Annual Meetings in Washington, the International Monetary Fund (IMF) maintained its June growth projections for India. The key highlights for India are:
- 7% growth for the current fiscal year ending March 31, 2025.
- 6.5% growth for the next fiscal year (FY2025-26).
- The decrease from 8.2% in 2023 is attributed to the exhaustion of pent-up demand accumulated during the pandemic, as India's economy reaches its potential.

Globally, the IMF forecasted:
- 3.2% global growth in both 2024 and 2025.
- U.S. growth at 2.8% this year and 2.2% next year, an upward revision from previous estimates.

Global inflation trends show improvement:
- Inflation, which had peaked at 9.4% in Q3 2022, is expected to drop to 3.5% by the end of 2025.
- The disinflationary process has successfully avoided a global recession, despite synchronized tightening of monetary policies.

However, the IMF highlighted several downside risks to the global outlook:
- Geopolitical risks, including the Russia-Ukraine war and conflicts in West Asia, particularly Lebanon.
- Protectionist policies and overly tight monetary policies could strain labor markets.
- Sovereign debt stress and weak activity in China were also cited as potential challenges.

To tackle the projected global growth of 3.2% over the medium term, which the IMF termed "relatively mediocre", a triple policy pivot was recommended:
Neutral monetary policy stance: Many countries are transitioning towards this.
Building fiscal buffers: After years of loose fiscal policies, fiscal consolidation is necessary.
Structural reforms: These are crucial for enhancing growth, productivity, and addressing challenges such as aging populations, youth employment, climate transition, and resilience building.