India to grow 6.8% in FY25, public investment to be the driver, says IMF

Indian economy will likely expand 6.8% in the current fiscal as public investment remains the primary growth driver, the International Monetary Fund said Tuesday in its Regional Economic Outlook for Asia and Pacific.

“In China and India, we expect investment to contribute disproportionately to growth—much of it public, especially in India,” said Krishna Srinivasan, Director, Asia and Pacific Department, IMF.

The IMF recently revised India’s growth forecast upward to 6.8% from 6.5% projected in its January forecast.


The fund also revised India’s FY24 growth outlook upward to 7.8%, higher than the government’s projection of 7.6%.

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

On the inflation front, IMF predicted a better situation for emerging markets, where it pointed out that inflation was already at or close to the target.

“Core inflation is largely expected to remain contained. As for headline inflation, several economies may experience further reductions due to lower energy prices while in others (for example, India), food price pressures—especially for rice—may slow headline disinflation,” it said.

India’s inflation declined to a 10-month low of 4.9% in March, according to data released last month. However, food inflation remained sticky above 8%.

IMF kept the FY25 forecast unchanged at 4.6%, easing to 4.2% in FY26.

The Reserve Bank of India expects inflation to fall to 4.5% in the current fiscal.

IMF also raised Asia and Pacific region’s forecast upwards to 4.5% from 4.2% projected in October.

“The outlook for Asia and the Pacific in 2024 has brightened: we now expect that the region’s economy will slow less than we previously projected as inflation pressures continue to dissipate,” it said.

The fund noted that risks to near-term outlook were more broadly balanced.

On the inflation front, the fund projected differentiated policies for the region.

“A tighter-for-longer stance in economies where inflation is elevated, and accommodative macro-policies in economies with sizeable slack,” it said.