IMF Retains India’s FY25 Growth Forecast at 6.5%

The International Monetary Fund (IMF) has maintained its projection for India’s economic growth at 6.5% for the fiscal year 2024-25 (FY25), as detailed in its latest World Economic Outlook update. This decision underscores a more pronounced deceleration in industrial activity than previously anticipated.

India’s Economic Outlook for 2024-25

Despite the IMF’s consistent forecast, India’s growth trajectory has experienced a notable slowdown. The National Statistics Office (NSO) projects the economy to expand by 6.4% in the current financial year, marking the lowest growth rate in four years and a significant drop from the 8.2% recorded in 2023-24. This deceleration is largely attributed to a sharper-than-expected decline in industrial activity.

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The World Bank has also adjusted its growth estimates for India, forecasting a 6.5% GDP growth for the current year and an anticipated 6.7% growth for the next year. Despite these downward revisions, India is poised to retain its status as the fastest-growing major economy globally, even amidst geopolitical tensions and global policy uncertainties.

On a broader scale, the IMF projects global growth at 3.3% for both 2025 and 2026, which falls below the historical average of 3.7% observed between 2000 and 2019. This forecast remains largely unchanged from the October 2024 World Economic Outlook, with an upward revision for the United States offsetting downward adjustments in other major economies.

The pronounced slowdown in India’s growth has prompted discussions on implementing measures to stimulate consumption, which some experts believe has been adversely affected by persistent inflationary pressures. There is growing pressure on the Reserve Bank of India to consider rate cuts to bolster growth. Additionally, the upcoming budget is anticipated to introduce initiatives aimed at accelerating economic expansion against the backdrop of an uncertain global economic environment.

While the IMF’s retention of India’s FY25 growth forecast at 6.5% reflects confidence in the country’s economic resilience, the sharper-than-expected slowdown in industrial activity signals the need for proactive policy interventions. Addressing inflationary pressures and implementing measures to boost consumption will be crucial in sustaining India’s growth momentum in the coming years.