IMF upgrades FY25 India GDP forecast to 6.8%

India's economic growth is projected to remain strong at 6.8% in 2024-25 and 6.5% in 2025-26, according to the International Monetary Fund's (IMF) World Economic Outlook for April 2024. The IMF’s growth projections are up from its previous forecast of 6.7% for 2024.

The "robustness" of the Indian economy reflects "continuing strength" in domestic demand and a rising working-age population, says the Washington, D.C.-based global financial agency.

The upgrade in GDP forecast for FY25 comes amid a series of recent positive commentaries about India's economy by global financial institutions like ADB, World Bank, Morgan Stanley, and S&P. They have estimated that India would register a GDP growth rate between 6.6% and 7% in FY25.

Growth in emerging and developing Asia is expected to fall from an estimated 5.6% in 2023 to 5.2% in 2024 and 4.9% in 2025, a slight upward revision compared with the January 2024 WEO update of the IMF.

It says growth in China is projected to slow from 5.2% in 2023 to 4.6% in 2024 and 4.1% in 2025 as the positive effects of one-off factors––including the post-pandemic boost to consumption and fiscal stimulus –– ease and weakness in the property sector persist.

Among major economies, IMF's latest growth forecast for 2024 estimates the US economy to grow at 2.7%, Germany 0.2%, France 0.7%, Italy 0.7%, Spain 1.9%, UK 0.5%, Japan 0.9%, the UK 0.5%, Japan 0.9%, China 4.6%, Russia 3.2%, Brazil 2.2%, Mexico 2.4%, KSA 2.6%, Nigeria 3.3% and South Africa 0.9%.

The IMF says the baseline forecast is for the world economy to continue growing at 3.2% during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3% in 2023 to 4.2% in both 2024 and 2025, forecasts the IMF.

“...the five largest emerging market economies — Brazil, China, India, Indonesia, and Russia — contributed around 0.8 percentage points of the 1.8 percentage point drop in projected global growth.”

The global agency thinks countries with a current demographic dividend could help support growth in the global workforce, in which nearly two in every three new entrants over the medium term will come from India and sub-Saharan Africa.

Notably, the government's second advance estimates have placed the real GDP growth at 7.6% for 2023-24, the third successive year of 7% or higher growth. The RBI in its latest note said the headwinds from protracted geopolitical tensions and increasing disruptions in trade routes pose risks to the overall outlook. "The real GDP growth for the current financial year 2024-25 is projected at 7% with Q1 at 7.1, Q2 at 6.9% and both Q3 and Q4 at 7% each," the central bank said this month.