Growth in India slowed more than expected, expected to remain at 6.5%, says IMF

Led by a sharper-than-expected deceleration in industrial activity, economic growth in India slowed more than anticipated and is projected to remain at 6.5% till 2026, the International Monetary Fund said on Friday.

"Growth in India slowed more than expected, led by a sharper-than-expected deceleration in industrial activity," the IMF said in its latest update of the World Economic Outlook, according to which the global economy is holding steady. In 2023, India's growth rate was 8.2%, which dropped to 6.5% in 2024.

The global growth is projected at 3.3% in 2025 and 2026, below the historical (2000–19) average of 3.7%. The forecast for 2025 is broadly unchanged from that in the October 2024 WEO, primarily on account of an upward revision in the US offsetting downward revisions in other major economies.

Global headline inflation is expected to decline to 4.2% in 2025 and to 3.5% in 2026, converging back to target earlier in advanced economies than in emerging markets and developing economies, it added.

According to IMF WEO, global growth is expected to remain stable, albeit lacklustre.

In the US, underlying demand remains robust, reflecting strong wealth effects, a less restrictive monetary policy stance, and supportive financial conditions. The growth is projected to be at 2.7% in 2025, the report said.

"In India, the growth is projected to be solid at 6.5% in 2025 and 2026, as projected in October and in line with potential," the IMF said.

In 2023, India’s growth rate was 8.2%, which dropped to 6.5% in 2024. It is expected to remain the same in 2025 and 2026, it said.

IMF’s Chief Economist Pierre-Olivier Gourinchas said the decline in inflation to 4.2% this year and 3.5% next year will help draw to a close the global disruptions of recent years, including the pandemic and Russia’s invasion of Ukraine, which precipitated the largest inflation surge in four decades.

In China, growth is now projected at 4.5% next year, up 0.4 percentage points from its prior forecast.