A view of the International Monetary Fund headquarters in Washington, DC, ahead of the 2024 annual meetings of the IMF and World Bank. | Photo credit: AFP
The International Monetary Fund (IMF) maintained its growth projects for India in its latest World Economic Outlook (WEO), released on Tuesday (October 22, 2024), to kick off the annual meetings of the World Bank and the IMF in Washington.
The multilateral lender expected India to grow 7% in the current fiscal year ending March 31, 2025, and 6.5% in the next fiscal year (2025-26). World production was expected to grow by 3.2% in both 2024 and 2025.
The decline in India’s growth of 8.2% in 2023 is “because pent-up demand accumulated during the pandemic has been depleted as the economy returns to its potential,” the report said.
The US is expected to grow 2.8% this year and 2.2% next year, an upward revision from the July WEO update.
Global inflation is falling.
“The global battle against inflation has largely been won, even as price pressures persist in some countries,” the IMF said. Inflation, which stood at 9.4% in the third quarter of 2022, is expected to reach 3.5% by the end of 2025.
A global recession has been avoided by the disinflationary process, despite a synchronized tightening of monetary conditions, the IMF said. However, downside risks now dominate the outlook. The risks had increased since the previous WEO publications in April and June this year.
The international financial institutions are meeting on the eve of the US elections and various conflicts around the world – and this has made its impact felt on the projections. Finance ministry officials from around the world, including Finance Minister Nirmala Sitharaman, will meet in Washington during the week.
“Of course there are geopolitical risks with the potential for escalation of regional conflicts, and how this could impact commodity markets…,” IMF chief economist Pierre-Olivier Gourinchas told reporters during a briefing call ahead of the report’s release.
The war between Russia and Ukraine continues and the conflict in West Asia has intensified in recent weeks, including in Lebanon.
The IMF’s chief economist also identified increasing protectionist policies as one of the risks. The fact that monetary policy in some countries remained too tight for too long and that this had consequences for the labor market also posed a risk, according to Mr Gourinchas. Sovereign debt tensions and weak activity in China were among the other risks he listed.
The IMF recommended a “three-pronged policy pivot” to respond to the “relatively mediocre” growth rate, as Mr Gourinchas put it, of 3.2% over the medium term. The first is the transition to neutral monetary policy, a process that is underway in many countries. The second is the need to build up fiscal buffers after years of accommodative fiscal policy. The third concerns structural reforms to increase growth and productivity, cope with an aging population and younger people looking for opportunities in some parts of the world, address the climate transition and increase resilience.
Published – Oct 22, 2024 7:25 PM IST
