India’s GDP Growth Projected at 6.5% for FY26, Reforms Essential: IMF
India is on track to maintain its status as the world’s fastest-growing major economy, with the International Monetary Fund (IMF) forecasting a robust GDP growth rate of 6.5% in the fiscal year 2025-26. This positive outlook is fueled by strong private investment and overall macroeconomic stability, highlighting India’s economic resilience amidst global uncertainties.
The IMF’s assessment aligns with the Indian government’s second advance estimate, which also anticipates a 6.5% GDP growth for the fiscal year 2024-25. According to the IMF, “Real GDP is expected to grow at 6.5% in 2024-25 and 2025-26, supported by robust growth in private consumption due to sustained macroeconomic and financial stability.”
Structural Reforms for Sustainable Growth
While India’s economic momentum remains robust, the IMF stresses the importance of implementing comprehensive structural reforms to ensure long-term expansion. The report highlights the necessity of labor market reforms, enhancing human capital, and promoting increased participation of women in the workforce to sustain economic growth.
Moreover, the IMF emphasizes the critical role of boosting private investment and foreign direct investment (FDI) in India’s economic development. Stable policy frameworks, improved ease of doing business, and enhanced trade integration through tariff and non-tariff reductions are essential elements for fostering growth and competitiveness.
Despite a slight moderation in growth, India’s economy has demonstrated resilience, with a 6% year-on-year GDP growth recorded in the first half of the fiscal year 2024-25. While inflation has remained within the Reserve Bank of India’s tolerance band of 2-6%, fluctuations in food prices have contributed to volatility in the market.
The IMF also highlights the strength of India’s financial sector, noting that non-performing loans are at multi-year lows. Continued fiscal consolidation efforts and a well-contained current account deficit, supported by robust service exports, have further contributed to the country’s economic stability.
Accelerated Growth in Q3 FY25
India’s real GDP growth surged to 6.2% in the October-December quarter of 2024 (Q3 FY25), marking a significant increase from the 5.6% growth recorded in the previous quarter (Q2). The rise in GDP was primarily driven by escalating consumption demand, as per quarterly GDP estimates released by the National Statistics Office (NSO) on February 27.
Looking ahead, the second advance estimates for the full financial year FY25 project a GDP growth rate of 6.5%, slightly surpassing the 6.4% forecasted in January’s initial advance estimates. This positive trajectory underscores India’s economic strength and resilience, setting the stage for continued growth and prosperity.
In conclusion, the IMF’s latest assessment reaffirms India’s economic potential and emphasizes the need for ongoing reforms to secure long-term prosperity. With a strategic focus on structural improvements, enhanced investment, and policy stability, India is poised to achieve its vision of transitioning into an advanced economy by 2047, showcasing the nation’s unwavering commitment to sustainable growth and development.