The International Monetary Fund (IMF) has increased India’s growth forecast for FY25 to 7 percent, up from the 6.8 percent predicted in April. For FY26, the IMF maintains its growth estimate at 6.5 percent. This update follows the Reserve Bank of India’s upward revision of the country’s growth forecast to 7.2 percent in June, up from 7 percent.
However, the IMF also cautioned that inflation in major economies is cooling slower than expected, which could pose a risk to global growth as interest rates might remain high for an extended period.
The IMF highlighted persistent services inflation driven by higher wages, as well as price pressures from trade and geopolitical tensions. It stated, “Services price inflation is hindering progress on reducing overall inflation, complicating efforts to normalize monetary policy. The risk of sustained inflation has increased, suggesting that interest rates may stay higher for longer.”
IMF On Global Economy
The IMF stated that the global economy remains on track for a soft landing, as it slightly increased the growth forecast for next year by 0.1 percentage point to 3.3% while maintaining this year’s projection at 3.2%. Chief Economist Pierre-Olivier Gourinchas noted that “significant changes are occurring beneath the surface.”
Pierre-Olivier Gourinchas criticized the US, expressing concern that, despite being at full employment, the country continues to maintain a fiscal policy that increases its debt-to-GDP ratio. He warned that this poses risks to both the domestic and global economy.
IMF about China
IMF gave a 0.4 percentage points upgrade to China to 5% this year and 4.5% in the next owing to a rebound in private consumption and strong exports in the first quarter. The IMF warned underlying weaknesses persist in areas such as the property sector as the lender sees growth in China’a economy slowing to 3.3% by 2029.
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