IMF projects India’s GDP growth at 6.3% in FY24-25

The International Monetary Fund (IMF) has projected India’s real GDP to grow at 6.3 per cent in the current financial year (2023-24) and the next fiscal year (2024-25), supported by macroeconomic and financial stability. 

The Fund said, India’s headline inflation is expected to gradually decline to the target although it currently remains volatile due to food price shocks. 

India’s current account deficit is expected to improve to 1.8 per cent of GDP in FY24 as services exports continue to remain strong and due to comparatively lower cost of oil imports.

Going forward, the country’s foundational digital public infrastructure and a strong government infrastructure programme will continue to sustain growth. India’s growth potential would be even better, with greater contributions from labor and human capital, if comprehensive reforms are implemented, IMF said.

However, there are still near-term risks like a sharp slowdown in global growth, which would affect India’s trade and financial flows. Besides, factors like volatility in global commodity prices and supply disruptions could cause fiscal pressure on India, according to IMF.

On the other hand, the Fund said, stronger than expected consumer demand, increased private investment, liberalised foreign investment and labour market reforms could further raise growth rate. 

The IMF executive board in its appraisal of the Indian economy, commended the Indian authorities for their prudent macroeconomic policies and reforms that resulted in the economy’s strong economic performance, resilience, and financial stability, despite continued global headwinds.

While India, continues to be one of the fastest growing economies globally, the IMF called for policies tailored to sustain economic stability and further key structural reforms to unleash the country’s true potential.

The IMF report noted that India’s economy showed robust growth over the past year. Headline inflation has moderated although it remained volatile. Employment has surpassed the pre pandemic level and, while the informal sector continues to dominate, formalisation has progressed. The financial sector has been resilient—strongest in several years—and largely unaffected by global financial stress in early 2023. 

The current account deficit widened in FY23 due mainly to the post-pandemic recovery of domestic demand. 

While the budget deficit has eased, public debt remains elevated and fiscal buffers need to be rebuilt. 

Globally, India’s 2023 G20 presidency has demonstrated the country’s important role in advancing multilateral policy priorities, it added.