The IMF now expects the Indian economy to grow at 7 per cent in 2024, up 0.2 percentage points from its earlier assessment.
The global economy is expected to grow at a stable pace in the near term. Growth has been pegged at 3.2 per cent in 2024 and 3.3 per cent in 2025 as per the July update of the International Monetary Fund’s World Economic Outlook. This is in line with the Fund’s assessment in April. Among developed economies, the IMF has raised its growth forecast for Spain and France, while paring down its earlier assessment of Japan. In the case of emerging markets and developing economies, the Fund has now lowered its expectations of growth prospects of the Middle East and Central Asia region as well as parts of Latin America, while sharply raising its expectations of the Chinese and Indian economy.
The IMF now expects the Indian economy to grow at 7 per cent in 2024, up 0.2 percentage points from its earlier assessment. The more upbeat prognosis, in part, reflects “improved prospects for private consumption, particularly in rural areas”. This is in line with the assessment of other agencies. On Wednesday, the Asian Development Bank reaffirmed its outlook for India, pegging growth at 7 per cent. ADB expects the agriculture sector to “rebound”, with the monsoon likely to be above-normal. On the other hand, the RBI has projected growth to be marginally higher at 7.2 per cent, while others like Crisil and ICRA have pegged it slightly lower at 6.8 per cent. These projections indicate that the underlying economic momentum remains healthy. The outlook for the next year also appears bright — the IMF has projected the economy to grow at 6.5 per cent, while the ADB expects growth at 7.2 per cent.
The World Economic Outlook notes that across the world, progress on disinflation is slowing. The risks to inflation have risen, and this raises “the prospect of higher for even longer interest rates”. In June, the US Fed chose to maintain the status quo on rates as the committee members opted to wait for “favourable” data that indicates that inflation is moving sustainably towards its target. As per the Fed dot-plot, there is now the likelihood of only one rate cut this year, down from earlier expectations of three cuts. Across the Atlantic, while the European Central Bank cut rates in June, there are expectations of status quo in the July meeting, and for the Bank to wait for more macroeconomic data before taking further action. On the other hand, as the IMF also notes, central banks in emerging economies are being “cautious” on lowering rates due to the implications for their currencies. In the case of India, while two members of the monetary policy committee have voted to cut rates, a change in policy appears unlikely in the near term as uncertainty over the trajectory of inflation, food in particular, persists.
