The International Monetary Fund (IMF) on Friday lowered India’s growth forecast to 6.5 per cent for the current fiscal year (2024-25 or FY25) as against 7 per cent estimated in October. Meanwhile, it has maintained the growth projection for the next two fiscal years (2025-26 or FY26 and 2026-27 or FY27) at 6.5 per cent.

“Growth in India also slowed more than expected, led by a sharper-than-expected deceleration in industrial activities,” IMF said in latest update of World Economic Outlook. Indian economy grew by 6.4 per cent in the July-September quarter, which led to lowering the estimates by various agencies, including RBI. While RBI Cuts the forecast for FY25 to 6.6 per cent against 7.2 per cent, the Statistics Ministry projected 6.6 per cent in first advance estimates.

Meanwhile, IMF expects growth to be better in the next two fiscal (FY26 and FY27)

“In India, growth is projected to be solid at 6.5 per cent in 2025 and 2026, as projected in October and in line with potential,” it said. However, these numbers are slightly lower than the World Bank’s projection, which expects 6.7 per cent growth in the next two fiscal. The economic survey will give projections for the next fiscal on January 31.

The falling rupee is one area of concern not just for growth projections but also for inflation and exports. In a report, Nomura said: “On our estimates, every 5 per cent of INR depreciation pushes up CPI inflation by 0.26pp, core CPI inflation by 0.10pp and GDP growth by 0.20pp. With weak global demand and soft consumption, we expect the currency impact on exports and inflation to be more muted this time.” Since November last year, till now, Rupee has weakened by nearly 3 per cent against US Dollar.

Global Growth

Meanwhile, in the latest economic outlook, the IMF said that global growth is projected at 3.3 per cent both in 2025 and 2026, below the historical (2000–19) average of 3.7 per cent. The forecast for 2025 is broadly unchanged from that in the October 2024 World Economic Outlook, primarily on account of an upward revision in the United States offsetting downward revisions in other major economies. Global headline inflation is expected to decline to 4.2 per cent in 2025 and 3.5 per cent in 2026, converging back to the target earlier in advanced economies than in emerging and developing economies.

In emerging markets and developing economies, growth performance in 2025 and 2026 is expected to broadly match that in 2024. With respect to the projection in October, China’s growth in 2025 is marginally revised upward by 0.1 percentage point to 4.6 per cent. This revision reflects carryover from 2024 and the fiscal package announced in November, largely offsetting the negative effect on investment from heightened trade policy uncertainty and property market drag.

“In 2026, growth is projected mostly to remain stable at 4.5 percent, as the effects of trade policy uncertainty dissipate and the retirement age increase slows down the decline in the labor supply,” the update said.