IMF predicts slower global disinflation, raises India's GDP forecast

The International Monetary Fund (IMF) on Tuesday revised its forecast for India's economic growth in the fiscal year 2024-25, now projecting a robust 7% increase from the 6.8% forecast in April.This upgrade reaffirms India's position as the fastest- growing major economy in the world. Besides,the latest upgrade reflects carryover from upward revisions in 2023 and takes into account improved prospects for private consumption, particularly in rural areas. 
The IMF's outlook further underscores several risks that could impact India's growth trajectory, including inflationary pressures, currency volatility, and global trade tensions. It emphasizes the necessity of prudent policy decisions to manage these risks effectively. Additionally, the report highlights the importance of multilateral cooperation to address global economic challenges and ensure sustainable growth.The IMF retained the country's growth forecast for FY26 at 6.5%, according to information. In its World Economic Outlook Update, the IMF reportedly stated the growth forecast for emerging markets and developing economies is revised to 4.3% from 4.2% earlier.
India's economy grew 8.2% in FY24. The Reserve Bank of India (RBI) had revised upwards the country's gross domestic product (GDP) forecast by 20 basis points (bps) to 7.2% last month, according to official data. One basis point is 0.01 percentage point.
The global economy is set for modest growth over the next two years amid cooling activity in the US, a bottoming-out in Europe and stronger consumption and exports for China, but risks to the path abound, stated report.Besides IMF in an update to its World Economic Outlook (WEO) has warned that momentum in the fight against inflation is slowing, which could further delay an easing of interest rates and keep up strong dollar pressure on developing economies.
China risks
The IMF has significantly hiked its China growth forecast to 5.0 per cent ,matching the Chinese government's target for the year from 4.6 per cent in April due to a first-quarter rebound in private consumption and strong exports. The IMF also boosted its 2025 China growth forecast to 4.5 per cent from 4.1 per cent in April, according to information.
However China's momentum may be sputtering, as Beijing on Monday reported second- quarter GDP growth of just 4.7 per cent, significantly below forecasts amid weak consumer spending amid a protracted property downturn.Experts believe,that the new data poses a downside risk to the IMF forecast, as it signals weakness in consumer confidence and continuing problems in the property sector. To boost domestic consumption, China needs to fully resolve its property crisis, as real estate is the main asset for most Chinese households.
Despite these challenges, India's strong fundamentals, including a growing manufacturing sector and dynamic service industry, continue to drive economic expansion. The IMF's optimistic forecast reflects confidence in India's economic resilience and its potential to maintain its growth momentum.

(Writer is a Finance Research Analyst, based in Gandhinagar, Gujarat)