Washington, 16 April

The International Monetary Fund on Tuesday raised India's growth projection to 6.8 per cent from its January forecast of 6.5 per cent citing bullish domestic demand conditions and a rising working-age population.

With this, India continues to be the fastest growing economy of the world, ahead of China's growth projection of 4.6 per cent during the same period. "Growth in India is projected to remain strong at 6.8 per cent in 2024 and 6.5 per cent in 2025, with the robustness reflecting continuing strength in domestic demand and a rising working-age population," said the latest edition of the World Economic Outlook released by the IMF ahead of the annual spring meetings of the IMF and the World Bank.

At the same time, growth in emerging and developing Asia is expected to fall from an estimated 5.6 per cent in 2023 to 5.2 per cent in 2024 and 4.9 per cent in 2025, a slight upward revision compared with the January 2024 WEO Update.

IMF in its January update had projected 6.5 per cent growth for India in 2024. "Growth in China is projected to slow from 5.2 per cent in 2023 to 4.6 per cent in 2024 and 4.1 per cent in 2025, as the positive effects of one-off factors –– including the post pandemic boost to consumption and fiscal stimulus –– ease and weakness in the property sector persists," the IMF said.

Global growth, estimated at 3.2 per cent in 2023, is projected to continue at the same pace in 2024 and 2025. The forecast for 2024 is revised up by 0.1 percentage point from the January 2024 WEO Update, and by 0.3 percentage point from the October 2023 WEO, the IMF said.

Policymakers should prioritize steps toward greater economic resilience such as strengthening government finances and revitalizing economic growth prospects, said Pierre-Olivier Gourinchas, chief economist of the IMF. "Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose. The journey has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, an energy and food crisis triggered by Russia's war on Ukraine, a considerable surge in inflation, followed by a globally synchronized monetary policy tightening," he said.

The chief economist said global growth bottomed out at the end of 2022, at 2.3 per cent, shortly after median headline inflation peaked at 9.4 per cent. Growth this year and next will hold steady at 3.2 per cent, with median headline inflation declining from 2.8 per cent at the end of 2024 to 2.4 per cent at the end of 2025. Most indicators continue to point to a soft landing, he observed. "We also project less economic scarring from the crises of the past four years, although estimates vary across countries. The US economy has already surged past its pre-pandemic trend. But we now estimate that there will be more scarring for low-income developing countries, many of which are still struggling to turn the page from the pandemic and cost-of-living crises," Gourinchas said.

"China's economy remains affected by the downturn in its property sector. Credit booms and busts never resolve themselves quickly, and this one is no exception. Domestic demand will remain lackluster unless strong measures address the root cause. With depressed domestic demand, external surpluses could well rise. The risk is that this will further exacerbate trade tensions in an already fraught geopolitical environment," he said.