The International Monetary Fund (IMF) projects a gradual slowdown in India's Gross Domestic Product (GDP) growth, forecasting a decrease from 8.2% in 2023 to 7% in 2024 and further to 6.5% in 2025. This deceleration is attributed to the exhaustion of pent-up demand from the COVID-19 pandemic, as the economy returns to its long-term growth trajectory.
Global Inflation Trends: A Positive Outlook
On the global front, the IMF reports significant progress in combating inflation. After peaking at 9.4% year-over-year in Q3 2022, global headline inflation is expected to decline to 3.5% by the end of 2025. This rate would fall below the pre-pandemic average of 3.6% recorded between 2000 and 2019, reflecting a return to price stability for many nations.
Steady Global Growth Amid Challenges
In its World Economic Outlook report, the IMF forecasts global economic growth to remain steady at 3.2% in both 2024 and 2025. However, it warned that several low-income developing countries could face downward growth revisions due to escalating conflicts and other structural challenges.
Pierre-Olivier Gourinchas, the IMF's Chief Economist, commended the resilience of the global economy during the disinflationary period. He cautioned, however, that downside risks, such as geopolitical tensions and monetary policy uncertainties, are becoming more pronounced.
Regional Growth Projections
- United States: Strong growth of 2.8% in 2023, expected to normalize by 2025.
- Advanced European Economies: A modest rebound is anticipated in 2024, nearing potential output levels.
- Emerging Markets and Developing Economies: Stable growth of around 4.2% is projected for 2024 and 2025, driven largely by strong performance in emerging Asian economies.
Rising Risks and Uncertainties
While global inflation trends are encouraging, the IMF has identified several growing risks:
- Geopolitical Tensions: Conflicts, particularly in the Middle East, could disrupt commodity markets.
- Protectionist Trade Policies: Rising trade barriers may lower global output compared to baseline forecasts.
- Monetary Policy Tightening: Prolonged tight monetary policies or abrupt financial tightening could destabilize growth.
India’s Domestic Economic Outlook
India’s latest Economic Survey aligns with IMF projections, anticipating GDP growth to moderate to 6.5%-7% in 2024-25, down from 8.2% in 2023-24. This reflects a normalization of economic activity as the impact of pandemic-induced demand fades.
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