The IMF has raised India's growth projection for 2025 to 7%, cementing it as the world's fastest-growing economy. This reflects improved prospects for private consumption, especially in rural areas. The IMF also retained India's 6.5% growth forecast for 2026 and revised up emerging markets' growth to 4.3%. China's 2024 growth is seen at 5% but projected to slow thereafter. The IMF emphasizes managing currency and capital flow risks, avoiding protectionism, and strengthening multilateral cooperation to tackle global challenges like climate change.
In a positive turn of events, the International Monetary Fund (IMF) has raised India's growth projection for the fiscal year 2025 to a robust 7%, cementing the country's position as the world's fastest-growing economy. This latest upgrade reflects the carryover from upward revisions in 2023 and takes into account the improved prospects for private consumption, particularly in rural areas.
The IMF has also retained India's growth forecast for the fiscal year 2026 at a healthy 6.5%. This positive outlook is further bolstered by the IMF's revised growth forecast for emerging markets and developing economies, which has been increased to 4.3% from the previous 4.2%.
"The forecast for growth in India has also been revised upward, to 7 percent, 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 fund noted.
"The projected increase is powered by stronger activity in Asia, particularly China and India," the IMF noted, highlighting the pivotal role that the two economic powerhouses will play in driving global growth in 2024. According to Gita Gopinath, the IMF's deputy managing director, "Growth in India and China will account for almost half of global growth in 2024."
The upbeat assessment is echoed by the Reserve Bank of India (RBI), which has also revised upwards the country's gross domestic product (GDP) forecast by 20 basis points to 7.2% for the current fiscal year. This positive trend is further corroborated by Fitch Ratings, which has increased India's growth forecast for the fiscal year 2025 to 7.2% from the previous 7%.
China's growth forecast has also been revised upward to 5% in 2024, primarily due to a rebound in private consumption and strong exports in the first quarter. However, the IMF cautions that China's GDP is projected to slow to 4.5% in 2025 and continue to decelerate over the medium term to 3.3% by 2029, owing to headwinds from aging and slowing productivity growth.
The IMF's outlook update also highlights the need for emerging markets and developing economies to manage the risks of currency and capital flow volatility, emphasizing the importance of allowing exchange rates to adjust while using monetary policy to maintain inflation close to target.
Despite the overall positive outlook, the IMF cautioned against the misuse of inward and domestically oriented policies that could compromise the ability to tackle global challenges, such as climate change. The organization underscored the importance of multilateral cooperation and trade, urging countries to scale back on the use of trade-distorting measures and strengthen the multilateral trading system.
The IMF's global growth forecast remains unchanged at 3.2% in 2024, expected to increase to 3.3% in 2025. The multilateral organization lowered its growth projections for the US and Japan compared to its previous April estimates, but revised China's growth outlook upwards.
The IMF noted that the balance of risks to the global economic outlook is neutral, with rising inflationary pressures potentially leading to the continuation of higher interest rates for an extended period.
In conclusion, the IMF's upward revision of India's growth projections, along with the positive outlook for emerging markets and developing economies, signals a promising economic future. This news serves as a testament to the resilience and potential of the global economy, reinforcing the importance of continued collaboration and policy coordination to navigate the challenges and seize the opportunities that lie ahead.
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