IMF revises India's FY25 GDP growth by 30 bps to 6.8% on buoyant domestic demand

However, it's worth noting that the IMF's estimate falls short of the government's projection of 7% growth.

“Growth in India is projected to remain strong at 6.8 percent in 2024 (FY25) and 6.5 percent in 2025 (FY26), with the robustness reflecting continuing strength in domestic demand and a rising working-age population,” the IMF said in its report.

IMF report presents data and forecasts on a financial year basis.

India has become the world's leading major economy in terms of growth, thanks to robust public investment and strong domestic demand, according to the International Monetary Fund (IMF).

In its report “India and the Philippines have been the source of repeated positive growth surprises, supported by resilient domestic demand,” the report said.

For FY24, the IMF raised India’s Gross Domestic Product growth projection to 7.8 percent, compared to 6.7 percent in its January report.

For FY26, the IMF expects the country’s economic growth to slow down slightly to 6.5 percent – the same as projected in its January update.

On the economic outlook for the Asia-Pacific region, the IMF said its increased growth forecast for the region is due to higher expectations for growth in India and China.

“The revision reflects upgrades for China, where we expect policy stimulus to provide support, and India, where public investment remains an important driver, making it the world’s fastest-growing major economy,” said Krishna Srinivasan, Director of the Asia and Pacific Department, International Monetary Fund, in a blog post.

According to the second advance estimate by the National Statistical Office, the GDP growth rate for 2023-24 was estimated at 7.6%, showing an improvement from the 7% growth rate recorded in 2022-23.

Rating agencies such as Fitch and Barclays have recently revised India's GDP growth projection for FY24 upward to 7.8% citing robust domestic demand and continuous growth in both business and consumer confidence levels.

In its last monthly economic report for February, the finance ministry emphasized that strong economic growth, coupled with stable inflation, a healthy external account, and a promising employment outlook, would contribute to a positive conclusion for the Indian economy in FY24.

"However, headwinds from geopolitical tensions, such as supply chain disruptions and higher logistics costs, volatility in international financial markets, and geoeconomic fragmentation, pose downside risks," it said.

The fund projected a decrease in India's consumer price inflation from an average of 5.4% in FY24 to 4.6% in FY25, with a further decline to 4.2% in FY26. This suggests a favourable trajectory for inflation, indicating potential stability and moderation in prices over the forecast period.