New York, March 1: India is projected to retain its status as the world's fastest-growing major economy with an estimated GDP growth rate of 6.5% in fiscal year 2025-26, driven by robust private investment and sustained macroeconomic stability, according to the latest report by the International Monetary Fund (IMF).
The IMF, following its recent Article IV consultations with India, highlighted the nation’s consistent economic performance as a critical opportunity to advance significant structural reforms. These reforms could play a pivotal role in realizing India’s goal of becoming an advanced economy by 2047.
Strong Economic Outlook Amidst Stable Inflation
According to the IMF, India's real GDP growth is forecasted at 6.5% in both 2024-25 and 2025-26. This growth is expected to be underpinned by solid private consumption supported by consistent macroeconomic and financial stability. This projection aligns with India's own second advance estimate for 2024-25, which also anticipates 6.5% growth.Additionally, India's headline inflation is likely to stabilize within the Reserve Bank of India’s targeted range of 2% to 6%, as recent shocks in food prices gradually subside.
Structural Reforms Essential for Long-Term Growth
Despite India's resilient economic growth—marked by a 6% year-on-year expansion in the first half of 2024-25—the IMF emphasized that deepening structural reforms remains crucial. Comprehensive reforms in the labour market, strengthening of human capital, and promoting higher female participation in the workforce are necessary to stimulate private investment, create quality employment opportunities, and drive sustainable economic growth.Boosting Private Investment and Foreign Direct Investment (FDI)
The IMF further noted the critical need to accelerate private investment and attract higher levels of FDI. Achieving this will require maintaining stable policy frameworks, further simplifying the ease of doing business, implementing governance reforms, and fostering deeper trade integration. Measures to achieve these goals include reducing both tariff and non-tariff trade barriers.Financial Sector Stability and Fiscal Discipline
Highlighting India's financial sector stability, the IMF noted that the country's banking system remains resilient, with non-performing loans currently at multi-year lows. Continued fiscal consolidation and a controlled current account deficit, supported notably by strong growth in service exports, further demonstrate India's prudent economic management.The IMF’s optimistic forecast for India's economy underscores both the significant potential and the necessity for continued reform, which is essential for India's aspiration to transition into an advanced economy within the next two decades.
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