IMF raises India's growth projection to 6.8% in 2024

NEW DELHI: The International Monetary Fund has increased India’s growth projection to 6.8 per cent from the previous forecast of 6.5 per cent. The revision was made considering bullish domestic demand conditions and a rising working-age population.

“India maintains its position as the fastest growing economy globally, surpassing China’s growth projection of 4.6 per cent during the same period,” IMF said in a statement.

The growth projection for India remains robust at 6.8 per cent in 2024 and 6.5 per cent in 2025, according to the latest edition of the World Economic Outlook by the IMF. The report highlights that this strength is attributed to continuing strength in domestic demand and a rising working-age population.

Simultaneously, there is a projected decline in growth for emerging and developing Asia, from an estimated 5.6 per cent in 2023 to 5.2 per cent in 2024 and 4.9 per cent in 2025. This revision is slightly higher than the figures in the January 2024 WEO Update.

In its January update, the IMF had forecasted a growth rate of 6.5 per cent for India in 2024.

“The growth rate in China is expected to decrease from 5.2 per cent in 2023 to 4.6 per cent in 2024 and 4.1 per cent in 2025,” as said by the IMF. This decline is attributed to the diminishing impact of one-off factors such as “the post pandemic boost to consumption and fiscal stimulus and the ongoing weakness in the property sector.”

The global growth rate, which was 3.2 per cent in 2023, is anticipated to maintain this momentum in both 2024 and 2025.

According to the IMF, the forecast for 2024 has been adjusted upwards by 0.1 percentage point compared to the January 2024 WEO Update, and by 0.3 percentage point from the October 2023 WEO.

“Policymakers need to focus on enhancing economic resilience by measures like bolstering government finances and rejuvenating economic growth prospects,” said Pierre-Olivier Gourinchas, the IMF’s chief economist.

The chief economist highlighted that global growth hit a low point by the conclusion of 2022, standing at 2.3 per cent, just after median headline inflation reached its peak at 9.4 per cent. The economist projected that growth for the current year and the following will remain stable at 3.2 per cent, while median headline inflation is expected to decrease from 2.8 per cent by the end of 2024 to 2.4 per cent by the end of 2025. “Most indicators continue to suggest a soft landing,” he noted.

“We also anticipate reduced economic scarring from the crises of the last four years,” said Gourinchas, “Although the estimates differ among countries. The US economy has surpassed its pre-pandemic trajectory. However, we predict more scarring for low-income developing nations, many of which are still grappling with the aftermath of the pandemic and cost-of-living challenges.”

“China’s economy continues to be impacted by the decline in its property sector. Credit booms and busts never resolve themselves rapidly, and this one is no exception.”

“Domestic demand is likely to stay lackluster unless robust measures tackle the root cause,” he said. “With depressed domestic demand, external surpluses may increase. The concern is that this could escalate trade tensions in an already tense geopolitical setting.”

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