IMF projects India growth to be solid at 6.5 pc in 2025 and 2026

New Delhi: In India, the economic growth is projected to be solid at 6.5 per cent in 2025 and 2026, as projected in October and in line with potential, the International Monetary Fund (IMF) has said in its latest World Economic Outlook (WEO) update.

The IMF forecast comes after the World Bank projected India’s economy to grow by 6.7 per cent in the next fiscal year starting in April, slightly higher than in the current fiscal year, and continuing to top the growth tally.

According to the IMF, the global economy is holding steady, although the degree of grip varies widely across countries.

Global GDP growth in the third quarter of 2024 was 0.1 percentage point below that predicted in the October 2024 WEO, after disappointing data releases in some Asian and European economies.

“Global growth is projected to hold steady at 3.3 per cent this year and next, aligned with weakened potential growth since the pandemic. Inflation is steadily declining — reaching 4.2 per cent this year and 3.5 per cent next —bringing us closer to central bank targets,” said IMF Chief Economist and Director of Research, Pierre-Olivier Gourinchas.

The US economy is exceeding expectations with stronger domestic demand, while Europe faces sluggish growth and persistently high energy prices.

“Emerging markets show resilience, with China set for a modest recovery,” said Gourinchas.

In emerging market and developing economies, growth performance in 2025 and 2026 is expected to broadly match that in 2024.

Policy-generated disruptions to the ongoing disinflation process could interrupt the pivot to easing monetary policy, with implications for fiscal sustainability and financial stability, according to the IMF.

“Monetary policy must remain agile to address inflation risks while preventing expectations from de-anchoring. Fiscal policies need to be put on a more stable footing,” Gourinchas stated.

This requires implementing credible consolidation efforts where needed. At the same time, structural reforms are key to protecting growth on this adjustment path and should be targeted at fostering innovation and competition.

All eyes are now on the RBI if it implements rate cuts next month as inflation cools off.

According to the IMF report, where inflation is proving sticky, central banks are moving more cautiously in the easing cycle while keeping a close eye on activity and labour market indicators as well as exchange rate movements.

“A few central banks are raising rates, marking a point of divergence in monetary policy,” it added.

The Word Bank’s Global Economic Prospects, released this Thursday, estimated the current fiscal year’s growth rate in India at 6.5 per cent.

It said that “the services sector is expected to enjoy sustained expansion, and manufacturing activity will strengthen, supported by government initiatives to improve the business environment”, buoying the growth projections of 6.7 per cent for the next two fiscal years.

—IANS