IMF Forecasts Strong Growth for India, Raises FY24 Outlook to 7.8%

The International Monetary Fund (IMF) has projected that India’s economy will grow by 6.8% in the current fiscal year, driven primarily by public investment. Krishna Srinivasan, Director of the Asia and Pacific Department at the IMF, stated, “In China and India, we expect investment to contribute disproportionately to growth—much of it public, especially in India.”

The IMF has revised its growth forecast for India upward from its January projection of 6.5% to 6.8%.

Additionally, the IMF has raised its outlook for India’s FY24 growth to 7.8%, surpassing the government’s estimate of 7.6%. The IMF report highlighted that “India and the Philippines have been the source of repeated positive growth surprises, supported by resilient domestic demand.”

Regarding inflation, the IMF anticipates a more favorable situation for emerging markets, where inflation is already at or near the target. The report stated, “Core inflation is largely expected to remain contained. As for headline inflation, several economies may experience further reductions due to lower energy prices while in others (for example, India), food price pressures—especially for rice—may slow headline disinflation.” India’s inflation rate fell to a 10-month low of 4.9% in March, although food inflation remained persistent above 8%.

The IMF has maintained its FY25 forecast for India at 4.6%, with a further decrease to 4.2% in FY26. The Reserve Bank of India anticipates inflation to drop to 4.5% in the current fiscal year.

In addition to India’s positive outlook, the IMF has raised its forecast for the Asia and Pacific region to 4.5% from the previously projected 4.2% in October. The fund noted that the region’s economic slowdown in 2024 is expected to be less severe than initially anticipated, as inflationary pressures continue to ease. The IMF also highlighted that risks to the near-term outlook are more evenly balanced.

Concerning inflation, the IMF suggested differentiated policies for the region, with a “tighter-for-longer stance in economies where inflation is elevated, and accommodative macro-policies in economies with sizeable slack.”