The International Monetary Fund (IMF) on Tuesday kept the growth forecasts for India unchanged at 7% for FY25 and 6.5% for FY26. It holds the pent-up demand accumulated during the pandemic has been exhausted as the economy reconnects with its potential growth.

In its latest World Economic Outlook report, IMF said, “In India, the outlook is for gross domestic product (GDP) growth to moderate from 8.2%  in 2023 to 7% in 2024 and 6.5% in 2025, because pent-up demand accumulated during the pandemic has been exhausted as the economy reconnects with its potential.”

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For India, the October outlook projects a headline inflation figure of 4.4% for FY25 and 4.1% for FY26.

Highlighting that structural reforms are necessary to lift medium-term growth prospects, it also discusses strategies to enhance the social acceptability of these reforms—a crucial prerequisite for successful implementation.

“Engaging early with key stakeholders, such as trade unions and business associations, has also been an effective approach toward communicating the need for reforms. [Like] in India, key principles deployed in the states of Gujarat and Rajasthan, which pioneered more flexible labour laws, skill development initiatives, and job creation strategies, were later adopted for national labour law reforms,” it noted.

On the global growth front, the latest outlook notes that the growth projection is virtually unchanged from those made earlier in July and is expected to remain stable yet underwhelming at 3.2% in 2024 and 2025.

However, the growth forecast for 2025 has been marginally revised downward by 10 basis points from 3.3% projected in July.

The IMF notes that important sectoral and regional shifts underpin the stable global outlook, with goods prices remaining elevated compared with those for services—a lingering effect of the pandemic and its aftermath.

Also, a global shift from goods to services consumption is underway, with emerging markets like India and China gaining in manufacturing production.

For China, the IMF revised downwards its 2024 growth projection by 20 basis points to 4.8%, while for the United States, it revised upwards by 20 basis points to 2.8%.

“Deeper- or longer-than-expected contraction in China’s property sector, especially if it leads to financial instability, could weaken consumer sentiment and generate negative global spillovers given China’s large footprint in global trade,” it noted.