IMF forecasts Indian growth rate at seven per cent in 2024

The IMF on Tuesday revised upward its projections for India and said the country is now expected to grow by seven per cent in 2024, compared to 6.8 per cent projected in April.

“The forecast for growth in India has been revised upward, to 7 per cent, this year, with the change reflecting carryover from upward revisions to growth in 2023 and improved prospects for private consumption, particularly in rural areas,” the International Monetary Fund said in its latest edition of the world economic outlook update.

India’s economy is now forecast to expand by 7 per cent, up from the 6.8 per cent the IMF had projected in April.

Overall, global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 per cent in 2024 and 3.3 per cent in 2025.

However, varied momentum in activity at the turn of the year has somewhat narrowed the output divergence across economies as cyclical factors wane and activity becomes better aligned with its potential.

Services price inflation is holding up progress on disinflation, which is complicating monetary policy normalisation. Upside risks to inflation have thus increased, raising the prospect of higher-for-even-longer interest rates, in the context of escalating trade tensions and increased policy uncertainty.

To manage these risks and preserve growth, the policy mix should be sequenced carefully to achieve price stability and replenish diminished buffers, the report said.

“Growth in major advanced economies is becoming more aligned as output gaps are closing. The United States shows increasing signs of cooling, especially in the labour market, after a strong 2023. The euro area, meanwhile, is poised to pick up after a nearly flat performance last year,” said Pierre-Olivier Gourinchas, Economic Counsellor and the Director of Research of the IMF.

“Asia’s emerging market economies remain the main engine for the global economy. Growth in India and China is revised upwards and accounts for almost half of global growth. Yet prospects for the next five years remain weak, largely because of waning momentum in emerging Asia. By 2029, growth in China is projected to moderate to 3.3 per cent, well below its current pace,” he said.

“As in April, we project global inflation will slow to 5.9 per cent this year from 6.7 per cent last year, broadly on track for a soft landing. But in some advanced economies, especially the United States, progress on disinflation has slowed, and risks are to the upside,” Gourinchas said.

“In China, resurgent domestic consumption propelled the positive upside in the first quarter, aided by what looked to be a temporary surge in exports belatedly reconnecting with last year’s rise in global demand. These developments have narrowed the output divergences somewhat across economies, as cyclical factors wane and activity becomes better aligned with its potent,” the report said.