IMF makes strong growth projections for India in 2024, says global 'soft landing' in sight

The International Monetary Fund (IMF) said on Tuesday that India's growth rate is expected to remain strong at 6.5 per cent in both 2024 and 2025, up 0.2 percentage points from October. Overall, it raised its forecast for global economic growth, improving the outlook for both the United States of America and China, the world's two largest economies, and citing faster-than-expected inflation relief.

Gita Gopinath, the First Deputy Managing Director of the IMF, while sharing the report on X (formerly known as Twitter), said, "Our latest World Economic Outlook projections are out. Main message 'Moderating inflation and steady growth open path to soft landing.' After 4 years of risks being mainly to the downside this WEO sees risks as more balanced."

Our latest World Economic Outlook projections are out. Main message "Moderating inflation and steady growth open path to soft landing." After 4 years of risks being mainly to the downside this WEO sees risks as more balanced. Read more here: https://t.co/DyAtKfItNL pic.twitter.com/nmAMSqYmVM

— Gita Gopinath (@GitaGopinath) January 30, 2024

The IMF's chief economist, Pierre-Olivier Gourinchas, stated that the global lender's updated World Economic Outlook indicated that a "soft landing" was imminent, but overall growth and global trade remained below the historical average. Reuters reported Gourinchas as saying, "The global economy continues to display remarkable resilience, with inflation declining steadily and growth holding up. The chance of a 'soft landing' has increased. We are very far from a global recession scenario." 

However, he warned that the expansion was slow and that risks remained, such as geopolitical tensions in the Middle East and attacks in the Red Sea, which could disrupt commodity prices and supply chains.

Delays in announced fiscal consolidation in what Gourinchas described as "the biggest global election year in history" may boost economic activity but also increase inflation, he added.

The IMF stated that the improved outlook was supported by higher private and public spending despite tight monetary conditions, as well as increased labour force participation, repaired supply chains, and lower energy and commodity prices.

The IMF predicted global growth of 3.1 per cent in 2024, up two-tenths of a percentage point from its October forecast, and 3.2 per cent in 2025. The historical average from 2000 to 2019 was 3.8 per cent.

Global trade was expected to grow by 3.3 per cent in 2024 and 3.6 per cent in 2025, well below the historical average of 4.9 per cent, with gains offset by thousands of new trade restrictions.

The IMF maintained its October forecast for headline inflation of 5.8 per cent in 2024, but reduced the 2025 forecast to 4.4 per cent from 4.6 per cent in October. Gourinchas predicted that global headline inflation would be lower if Argentina, which has experienced an inflation spike, was excluded.

IMF raises Asia's growth forecast 

The IMF also projected that emerging Asian economies would grow 5.2 per cent this year, down from 2023 but up from its forecast three months ago due to stronger-than-expected growth in China.

The region's growth forecast for 2024 has been upgraded by 0.4 percentage point from October, compared to a 5.4 per cent expansion last year. The IMF's upgraded World Economic Outlook predicts that emerging and developing Asia will grow 4.8 per cent in 2025.

China's growth forecast for this year was revised up by 0.4 percentage point to 4.6 per cent due to increased government spending, but it remains slower than last year's 5.2 per cent expansion.

(With Agency Inputs)