India's GDP growth likely to moderate to 7% in 2024, 6.5% in 2025: IMF

The International Monetary Fund (IMF) in the World Economic Outlook has said that India's Gross Domestic Product (GDP) growth is likely to moderate from 8.2 % in 2023 to 7 % in 2024 and 6.5 % in 2025 because the pent-up demand accumulated during Covid has exhausted, as the economy reconnects with its potential.

About the global economy, the IMF said the battle against inflation has largely been won, even though price pressures persist in some countries. It said that 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, which is below the average level of 3.6 % between 2000 and 2019.

It has projected global economic growth to stay steady at 3.2 % in 2024 and 2025, even though a few countries, especially low-income developing countries, have seen sizable downside growth revisions.

According to Pierre-Olivier Gourinchas, a French economist and IMF Chief Economist, the global economy remained unusually resilient throughout the disinflationary process. He said, ‘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’.

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. 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.