IMF Projects India’s GDP Growth To Slow to 7% In 2024 Amid Disinflation

India's gross domestic product growth is likely to moderate from 8.2% in 2023 to 7% in 2024 and 6.5% in 2025 due to exhausted pent-up demand accumulated during Covid amid the economy regaining its potential, the International Monetary Fund said on Tuesday.

The IMF said the battle against inflation has by and large been won by the global economy despite persisting price pressures in some countries.

After peaking at 9.4% year over year in the third quarter of 2022, headline inflation rates are now projected to reach 3.5% by the end of 2025, below the average level of 3.6% between 2000 and 2019, it said.

The annual World Economic Outlook forecasted global economic growth to remain stable at 3.2% in 2024 and 2025, amid considerable downside growth revisions of low-income developing countries.

"In India, the outlook is for GDP growth to moderate from 8.2% in 2023 to 7% in 2024 and 6.5% in 2025 because pent-up demand accumulated during the pandemic has been exhausted as the economy reconnects with its potential," the IMF said in the World Economic Outlook.

According to the latest Economic Survey, the GDP growth in 2024–25 is expected to moderate to 6.5–7% from 8.2% in 2023–24.

Pierre-Olivier Gourinchas, the Chief Economist at the IMF, stated that the global economy has shown remarkable resilience during the disinflationary process. "Growth is projected to hold steady at 3.2% in 2024 and 2025, but some low-income and developing economies have seen sizable downside growth revisions, often tied to intensifying conflicts," he said.

In advanced economies, growth in the United States is strong, at 2.8% this year, but will revert toward its potential in 2025.

For advanced European economies, a modest growth rebound is expected next year, with output approaching potential. The growth outlook is very stable in emerging markets and developing economies, around 4.2% this year and next, with continued robust performance from emerging Asia, he said.

"Despite the good news on inflation, downside risks are increasing and now dominate the outlook. An escalation in regional conflicts, especially in the Middle East, could pose serious risks for commodity markets.

Shifts toward undesirable trade and industrial policies can significantly lower output relative to our baseline forecast. Monetary policy could remain too tight for too long, and global financial conditions could tighten abruptly," he said.

With Inputs From PTI