IMF raises India’s GDP forecast to 6.8% for FY25

With an anticipated surge in domestic demand, the IMF now estimates India's GDP growth to reach 6.8 percent, marking an upward revision of 30 basis points from its previous forecast. This adjustment reflects the enduring strength of domestic demand and the ascending trajectory of the working-age population within the country.

Key Highlights from IMF's World Economic Outlook (WEO)

Strengthened Growth Trajectory

FY24 Projections: India's GDP growth for FY24 is projected at 7.8 percent, showcasing a robust economic performance.

Continued Strength in Domestic Demand

Driving Factors: The sustained robustness in India's economic growth is attributed to the enduring vigor in domestic demand, coupled with the burgeoning working-age population.

1: Dimension- Comparative Analysis

• IMF vs. Other Projections: While the IMF's revised projection is optimistic, it remains slightly conservative compared to forecasts by other institutions. The Asian Development Bank (ADB) recently revised its projection for India's growth to 7%, citing robust public and private sector investment and improving consumer demand.
• RBI's Outlook: The Reserve Bank of India (RBI) echoes a positive sentiment, with Governor Shaktikanta Das highlighting bright prospects in agriculture and rural activity, projecting a growth rate of 7% for the Indian economy.

2: Dimension- Impact on Economic Sectors

• Rural Economy and Monsoon: Forecasts of an above-normal monsoon by the India Meteorological Department (IMD) bode well for rural demand, crucial for overall economic growth. Last year's below-normal monsoon dampened farm growth, underscoring the significance of favorable weather conditions for agricultural productivity.
• Manufacturing and Services: Despite agricultural challenges, robust growth in manufacturing and services sectors played a pivotal role in propelling the economy to over 7.5% growth in the previous year.

3: Dimension- Global Economic Context

• Global Economic Outlook: The global economy is anticipated to grow at a steady pace of 3.2% in 2024 and 2025, although below the historical average. This projection reflects factors such as restrictive monetary policies, withdrawal of fiscal support, and subdued productivity growth.
• Regional Variances: Advanced economies are expected to witness slight growth upticks, particularly in the euro area. Meanwhile, emerging market and developing economies are poised for stable growth, albeit with regional disparities.

Mains Practice Question

Q. “For developing economies like India, sustained economic growth depends not only on domestic factors but also on navigating through the complexities of the global economic environment." Discuss