A day after a Finance Ministry report expected economic growth close to 7 per cent during next fiscal, International Monetary Fund (IMF) projects growth rate at 6.5 per cent for next two fiscal, which is 20 basis points higher than previous projection. For For current fiscal, growth rate estimate is now 6.7 per cent, 40 basis points higher than earlier projection. 100 basis points mean one percentage point.

“Growth in India is projected to remain strong at 6.5 percent in both 2024 (FY 2024-25) and 2025 (FY 2025-26), with an upgrade from October of 0.2 percentage point for both years, reflecting resilience in domestic demand,” IMF said in its update on World Economic Outlook (WEO), released on Tuesday.

Earlier, the National Statistical Office (NSO), in the first advance estimate for FY24, projected a growth rate of 7.3 per cent as against 7.2 per cent of FY23. Many domestic and global research agencies expect growth rate in the range of 6.3 to 6.5 per cent with upward bias.

Also read: Interim Budget must continue capex-led growth strategy, says CII DG Chandrajit Banerjee

In a tweet, Finance Ministry attributed revision in current fiscal growth to the robust Q2 GDP outturn. Further it said: “the IMF has revised upward medium-term (potential) GDP growth to 6.5 per cent (from 6.3 per cent) reflecting strong public investment, positive labor market outcomes in the latest PLFS report, and adjustments to our model.” According to the Ministry, IMF continues to view the external sector as strong and is narrowing its current account deficit projection for FY 24 from 1.8 per cent (of GDP) to 1.6 per cent.

“India continues to be the fastest-growing economy among the major economies of the world,” the Ministry said. On Monday, a Ministry report placed FY25 GDP growth close to 7 per cent despite new geopolitical risks such as the Red Sea crisis that could impact global inflation and economic output. The report said India can aspire to become a $7-trillion economy by 2030.

It also highlighted that the government’s move to focus on capex-led growth strategy has paid rich dividends for the economy. Effectively, the capital expenditure of the public sector (including Union government capex, grants to the States for capital asset creation, and investment resources of the Central PSEs) has increased from ₹5.6-lakh crore in FY15 to ₹18.6-lakh crore in FY24, it highlighted.

Global Growth

Meanwhile, the WEO update has upped growth forecast for the global economy. Global growth is projected at 3.1 percent in 2024 (20 basis points higher than earlier forecast) and 3.2 percent in 2025, on account of greater-than expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China.

Also read: Interim Budget 2024| MSMEs seek strategic policies for growth and innovation

The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 percent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth. Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy. Global headline inflation is expected to fall to 5.8 percent in 2024 and to 4.4 percent in 2025, with the 2025 forecast revised down, the update said.

In an accompanying blog by Pierre-Olivier Gourinchas, the Economic Counsellor and the Director of Research at IMF, said: “The clouds are beginning to part. The global economy begins the final descent toward a soft landing, with inflation declining steadily and growth holding up. But the pace of expansion remains slow, and turbulence may lie ahead.”  

Related Topics