India's economic growth is projected to remain strong at 6.5 per cent in 2025 and 2026, in line with earlier forecasts from October and aligned with its potential, according to the latest update of the World Economic Outlook (WEO) by the International Monetary Fund (IMF).
This projection follows the World Bank’s recent forecast of a 6.7 per cent growth rate for India in the next fiscal year starting in April, slightly above the current fiscal year’s growth and maintaining India’s position as a leader in global growth rankings.
The IMF noted that the global economy is stabilising, albeit with significant variation across countries. Global GDP growth in the third quarter of 2024 fell 0.1 percentage point short of the October 2024 WEO forecast due to disappointing data from some Asian and European nations.
"Global growth is expected to hold steady at 3.3per centthis year and next, reflecting weakened potential growth since the pandemic. Inflation is steadily decreasing — reaching 4.2per cent this year and 3.5per cent next — bringing it closer to central bank targets," stated IMF Chief Economist and Director of Research, Pierre-Olivier Gourinchas.
The US economy is surpassing expectations due to robust domestic demand, while Europe struggles with slow growth and persistently high energy prices.
"Emerging markets remain resilient, with China on course for modest recovery," Gourinchas added.
Emerging market and developing economies are expected to sustain growth levels in 2025 and 2026 comparable to 2024. However, the IMF warned that policy-driven disruptions to the disinflation process could hinder the shift to looser monetary policy, affecting fiscal sustainability and financial stability.
"Monetary policy must remain flexible to address inflation risks while preventing expectations from de-anchoring. Fiscal policies need stabilising through credible consolidation efforts," Gourinchas said, emphasising the importance of structural reforms to foster innovation and competition during this adjustment.
Attention now turns to the Reserve Bank of India (RBI), which could implement rate cuts next month as inflation moderates.
The IMF report highlighted that where inflation remains stubborn, central banks are taking a cautious approach to easing monetary policy. They are closely monitoring activity, labour markets, and exchange rate movements. "A few central banks are still raising rates, marking a divergence in monetary policy," the report noted.
The World Bank’s Global Economic Prospects, released on Thursday, estimated India’s current fiscal growth at 6.5per cent.
It anticipates sustained expansion in the services sector and strengthening manufacturing activity, driven by government initiatives to enhance the business environment, underpinning the 6.7 per centgrowth projection for the next two fiscal years.
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