The International Monetary Fund (IMF) raised India’s growth forecast for FY25 to 7 per cent from 6.8 per cent projected in April. IMF said that it expects Indian economy to grow 6.5 per cent in FY26 which is unchanged from April. This comes as the Reserve Bank of India revised India’s growth forecast upward to 7.2 from 7 per cent earlier in June.
The Washington-based lender also warned that inflation in many major economies has been cooling slower than expected. This could potentially be of risk to global growth as interest rates are likely to stay higher “for even longer.”
Zeroing in on stubborn services inflation driven by higher wages, IMF also pointed to price pressures from trade and geopolitical tensions. It said, “Services price inflation is holding up progress on disinflation, which is complicating monetary policy normalization. Upside risks to inflation have thus increased, raising the prospect of higher-for-even-longer interest rates.”
IMF said that the global economy is still poised for a soft landing as it raised the growth outlook for next year by 0.1 percentage point to 3.3% and left this year unchanged at 3.2%. Chief Economist Pierre-Olivier Gourinchas said that “there have been notable developments beneath the surface.”
Taking aim at the US, Pierre-Olivier Gourinchas said that it’s “concerning that a country like the United States, at full employment, maintains a fiscal stance that pushes its debt-to-GDP ratio steadily higher, with risks to both the domestic and global economy.”
IMF gave a 0.4 percentage points upgrade to China to 5% this year and 4.5% in the next owing to a rebound in private consumption and strong exports in the first quarter. The IMF warned underlying weaknesses persist in areas such as the property sector as the lender sees growth in China’a economy slowing to 3.3% by 2029.
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