IMF raises India's growth outlook for FY24 to 6.7%, FY25 to 6.5%

The International Monetary Fund (IMF) has upgraded India’s growth outlook on the back of better-than-expected resilience in its domestic demand, it said in its latest World Economic Outlook update for January.

IMF now expects India’s GDP to grow by 6.7% in FY24, 40 basis points higher than its previous forecast of 6.3% given in the October 2023 update of its report. One basis point is one-hundredth of a percent.

For FY25 and FY26, India’s GDP growth is seen steady at 6.5%, a 20 basis point upgrade from its October 2023 forecast, the IMF said in its report released on Tuesday, January 30.

“Growth in India is projected to remain strong at 6.5% in both 2024 (FY25) and 2025 (FY26), with an upgrade from October of 0.2 percentage point for both years, reflecting resilience in domestic demand,” the IMF said in its report.

At 6.7% GDP growth forecast for India in FY24, the IMF’s forecast is lower than both the Reserve Bank of India’s 7% estimate and the National Statistics Organisation’s (NSO) first advance forecast of 7.3% for the financial year ending March 2024.

In FY23, India’s GDP had expanded by 7.2% over the previous year. So far in the first half of FY24, the Indian economy has grown by 7.7% between April and September 2024.

As for FY25, the government is of the view that India’s GDP could be closer to 7%, than the 6.5% projected by the IMF in its latest update.

On Monday, the Indian government released a report titled 'Indian Economy—A Review' prepared by the office of Chief Economic Adviser V Anantha Nageswaran, taking stock of the state of the economy and its journey in the last ten years.

“The strength of the domestic demand has driven the economy to a 7% plus growth rate in the last three years… The robustness seen in domestic demand, namely, private consumption and investment, traces its origin to the reforms and measures implemented by the government over the last ten years. The supply side has also been strengthened with investment in infrastructure – physical and digital – and measures that aim to boost manufacturing. These have combined to provide an impetus to economic activity in the country. Accordingly, in FY25, real GDP growth will likely be closer to 7%,” the report said.

This Indian economy review report by the CEA added that in the next three years, India is expected to become the third-largest economy in the world, with a GDP of $5 trillion.

“There is, however, considerable scope for the growth rate to rise well above 7% by 2030. The speed with which physical infrastructure is being built will allow the ICOR to decline, translating private investments into output quickly. The IBC has strengthened balance sheets and, in the process, has freed up economic capital that was otherwise rendered unproductive. The rapidly expanding digital infrastructure is continuously improving institutional efficiency. Technological progress is picking up pace with rising collaboration with foreign partners in the production of goods and services. Decisive steps have been taken to speed up human capital formation. Finally, the overall investment climate is increasingly becoming more favourable with sustained enhancement in the ease of doing business,” said the government report.