The International Monetary Fund (IMF) has increased its growth forecast for India’s economy for the fiscal year 2025. Previously, the IMF projected a growth rate of 6.8%, but it has now raised this estimate to 7%. The Reserve Bank of India also revised its forecast, predicting a growth rate of 7.2% compared to its earlier estimate of 7%. For the fiscal year 2026, the IMF expects India’s economy to grow at 6.5%, which remains unchanged from its previous forecast.
Despite the positive growth projections, the IMF has issued a warning about rising inflation. The organization noted that inflation in many major economies is decreasing more slowly than expected. This slow reduction in inflation could pose a risk to global economic growth, as it might lead to interest rates remaining high for an extended period. The IMF highlighted that inflation in the services sector, driven by higher wages, is a significant factor.
Despite these inflation concerns, the IMF remains optimistic about the global economy. It has slightly increased its growth outlook for next year by 0.1 percentage points to 3.3%, while maintaining this year’s growth forecast at 3.2%. Pierre-Olivier Gourinchas, the IMF’s Chief Economist, commented, “There have been notable developments beneath the surface.”
Concerns Over US Economic Policies
The IMF expressed concerns about the United States’ economic policies. Gourinchas criticized the U.S. for maintaining a fiscal stance that increases its debt-to-GDP ratio, despite being at full employment. He warned that this approach could pose risks to both the domestic and global economy.
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The IMF has also upgraded its growth forecast for China by 0.4 percentage points, projecting a 5% growth rate for this year and 4.5% for the next year. This positive revision is due to a rebound in private consumption and strong exports in the first quarter of the year. However, the IMF cautioned that underlying weaknesses, such as issues in the property sector, persist. It predicts that China’s economic growth will slow to 3.3% by 2029.
While the IMF has raised growth forecasts for India and China, it remains wary of rising inflation and its potential impact on global economic stability. The organization is particularly concerned about the U.S.’s fiscal policies and their long-term implications. Despite these challenges, the IMF maintains a cautiously optimistic outlook for the global economy, anticipating modest growth in the coming years.
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