In a significant update on global economic forecasts, the International Monetary Fund (IMF) has upgraded India’s growth projection for the year 2024 to 6.8%, a notch higher than its January forecast of 6.5%. This revision underscores India’s resilient domestic demand and a demographic dividend characterized by a burgeoning working-age population. The adjustment ensures India’s position as the world’s fastest expanding major economy, surpassing China, which has a projected growth of 4.6% for the same period.
The revision emerged from the latest World Economic Outlook, which the IMF released prior to the annual spring meetings with the World Bank. According to the report, India’s vigorous growth trajectory is expected to continue into 2025, with a strong rate of 6.5%. The underlying strength in domestic demand and the increasing working-age populace are pivotal variables driving the robust economic performance.
Coupled with India’s positive revision, the growth projection for emerging and developing regions in Asia has also been corrected slightly upwards. From an estimated 5.6% in 2023, growth is anticipated to moderate to 5.2% in 2024 and slightly further to 4.9% in 2025. Notably, this is an upward revision from previous forecasts contained in the January 2024 WEO Update.
Previously, the IMF had foreseen a 6.5% growth rate for India in 2024 in its January update. The IMF’s latest assessment paints a nuanced picture across different geographies. For China, expected economic expansion is set to decelerate, dropping from 5.2% in 2023 to 4.6% in 2024, and further to 4.1% in 2025. The slowdown is primarily attributed to the diminished impact of temporary stimulative factors in the wake of the pandemic’s abatement and the ongoing downturn in the property sector.
On a broader scale, the global economy is estimated to grow at a steady clip of 3.2% in 2023, maintaining that pace through 2024 and 2025. This represents a slight upward revision from prior forecasts, marking a 0.1 percentage point increase from the January 2024 WEO Update and a 0.3 percentage point rise from the October 2023 WEO.
The chief economist of the IMF, Pierre-Olivier Gourinchas, emphasized the need for policymakers to prioritize greater economic resilience. He advocates for initiatives aimed at bolstering government finances and reviving economic growth potential. Gourinchas reflects on the global economy’s resilience despite various headwinds, including supply-chain upheavals, the pandemic’s aftermath, a crisis in energy and food precipitated by the conflict in Ukraine, rising inflation, followed by a synchronized international response of monetary policy tightening.
End-2022 saw global growth reaching a trough of 2.3%, coinciding with a peak in median headline inflation at 9.4%. Gourinchas notes that global growth is anticipated to hold steady at 3.2% in the following years, with median headline inflation projected to decrease to 2.8% by the end of 2024 and further to 2.4% by the end of 2025. Most indicators are suggestive of a “soft landing” scenario.
However, the prevailing economic crises continue to leave varying degrees of scars across countries. While the U.S. economy has rebounded past pre-pandemic levels, low-income developing nations endure greater economic difficulties due to their ongoing struggles with the pandemic and cost-of-living issues. Gourinchas spotlights China’s property sector slump, cautioning that without strong measures to address core issues, domestic demand may remain subdued, potentially fuelling further trade tensions in an already tense geopolitical climate.
Thus, while India’s economic outperformance is a beacon of promise in the global financial spectrum, the IMF underscores that sustained vigilance and strategic policy interventions remain essential to navigate the complex tapestry of challenges and opportunities that lie ahead.
