IMF Raises India's GDP Growth Forecast to 6.8% for FY25

IMF boosts India's GDP growth forecast to 6.8% for FY25, citing strong domestic demand and rising working-age population. India set to retain its position as the world's fastest-growing major economy.

Rafia Tasleem
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IMF Raises India's GDP Growth Forecast to 6.8% for FY25

IMF Raises India's GDP Growth Forecast to 6.8% for FY25

The International Monetary Fund (IMF) has revised India's GDP growth forecast for the fiscal year 2024-25 upwards to 6.8%, an increase of 30 basis points from its previous estimate of 6.5%. The IMF cited strong domestic demand and a rising working-age population as key factors contributing to this upward revision. India is now expected to retain its position as the world's fastest-growing major economy, outpacing China's projected growth of 4.6% for the same period.

The IMF's World Economic Outlook report also projects India's GDP growth for the fiscal year 2025-26 at 6.5%. These revised forecasts come on the heels of India's impressive economic performance in the fiscal year 2023-24, which saw a growth rate of 7.8%. The Reserve Bank of India (RBI) estimates the Indian economy will grow at 7% in the current fiscal year that began on April 1, 2024.

Why this matters:The IMF's upward revision of India's GDP growth forecast highlights the country's economic resilience and its potential to drive global growth. As the world navigates a challenging economic landscape, India's strong performance offers a glimmer of hope and stability.

The IMF report also highlighted the global economy's remarkable resilience, with growth holding steady as inflation returns to target. The global real GDP growth is predicted to be 3.2% for 2024 and 2025, the same rate as in 2023. However, the IMF cautioned that geopolitical tensions and trade route disruptions pose risks to the overall outlook.

India's domestic demand, fueled by a growing middle class and increased infrastructure spending, has been a key driver of its growth momentum. The government's push for infrastructure development, digitalization, and ease of doing business reforms have contributed to India's positive investment sentiment. As India cements its position as a global economic powerhouse, its ability to chart a course through challenges and capitalize on its strengths will shape its future growth trajectory and aspirations to become a high-income economy by 2047.

The IMF's revised growth projections for India align with the positive outlook shared by other global financial institutions such as the Asian Development Bank (ADB), World Bank, Morgan Stanley, and S&P, which have estimated India's GDP growth rate between 6.6% and 7% for the fiscal year 2024-25. However, the RBI has cautioned that inflationary pressures, job creation, and improving the quality of employment opportunities remain key challenges for the Indian economy.

Key Takeaways

  • IMF raises India's FY25 GDP growth forecast to 6.8%, up 30 bps from 6.5%.
  • India to retain position as world's fastest-growing major economy, outpacing China.
  • IMF projects India's GDP growth at 6.5% for FY26, highlighting economic resilience.
  • India's domestic demand and infrastructure spending drive growth momentum.
  • Other global institutions also project India's GDP growth between 6.6-7% for FY25.