India's GDP Growth Prediction for FY25 is Raised by 20 Basis Points to 7% by the IMF

Nitin Konde

Jul 17, 2024 — 3 min read

IMF Raises India's FY25 GDP Growth Prediction to 7%

For fiscal year 2024–25 (FY25), the IMF increased India’s growth prediction by 20 basis points (BPS), bringing it up to 7% from 6.8%. The improvement in private consumption, especially in rural India, is the reason for the improvement in the growth projection, according to the International Monetary Fund's (IMF) World Economic Outlook (WEO).

The International Monetary Fund (IMF) revised its GDP growth prediction for India up from 6.5% in April to 6.8%. The UN's international financial agency maintained its projection for the 2025–26 fiscal year (FY26) of 6.5% growth in the GDP of Asia's third-largest economy.

The International Monetary Fund also noted that its earlier projection for global economic growth in 2023 was 3.3% and that its current forecast for this year is 3.2%, both of which are unimpressive. Prior to the pandemic disrupting economic activity in 2019, global growth averaged 3.8% annually.

Optimism for Global Growth Curbed; Downgraded US Projection

As a result of slowing US activity and a dropping out in Europe, the world economy is expected to have modest growth in the coming two years. The International Monetary Fund has issued a warning about the slowing down fight against inflation, which could lead to a postponement of interest rate cuts and the maintenance of strong dollar pressure on emerging countries.

Although it increased its 2025 prediction by 0.1 percentage point to 3.3 percent, the International Monetary Fund maintained its 2024 forecast of 3.2% global real GDP growth unchanged from April. Forecasts fall short of preventing growth from plunging into "the tepid twenties," as warned by IMF managing director Kristalina Georgieva.

Inflation is predicted to continue falling globally, from 6.7% in 2023 to 5.9% this year and 4.4% in 2025, after spiking to 8.7% in 2022 due to the fast recovery of the global economy from the pandemic recession. As a result of the first quarter's disappointing performance, the International Monetary Fund lowered its growth prediction for the United States for this year from 2.7% to 2.6%.

Service prices stayed high due to wage growth in the labor-intensive sector, and the International Monetary Fund (IMF) cautioned that inflation could rise in the near future due to increased costs of imported goods caused by rekindled trade and geopolitical tensions.

GDP Projections for India and China

According to official statistics, India's GDP expanded by 8.2% in FY24. Both 2022–23 and 2021–22 saw economic growth of 7.2% and 8.7%, respectively. During its most recent monetary policy meeting, the Reserve Bank of India (RBI) increased its GDP prediction for FY25 from 7% to 7.2%.

This year, the International Monetary Fund raised its growth prediction for China to 5% from 4.6% in April, although it fell short of 5.2% in 2023, in part due to a spike in Chinese exports in early 2024.

Prior to the release of Monday's (July 15, 2024) data, the world's second-largest economy—China—had expanded at a slower-than-expected 4.7% annual rate from April through June, down from 5.3% in the first three months of the year. This was before the IMF prediction was made public.