IMF Executive Board Concludes 2024 Article IV Consultation with India
IMF News, February 27, 2025
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- Published: February 27, 2025
Recent performance and macroeconomic stance
- GDP growth of 6 percent y/y in the first half of 2024/25.
- Inflation has broadly declined within the tolerance band, with food price fluctuations creating some volatility.
- Financial sector resilient; non-performing loans at multi-year lows.
- Fiscal consolidation has continued.
- Current account deficit has remained well contained, supported by strong growth in service exports.
Outlook and projections
- Real GDP is expected to grow at 6.5 percent in 2024/25 and 2025/26.
- Headline inflation is expected to converge to target as food price shocks wane.
- Current account is expected to widen somewhat but remain moderate at -1.3 percent of GDP in 2025/26.
- India’s financial sector health, strengthened corporate balance sheets, and digital public infrastructure support potential for sustained medium-term growth and continued social welfare gains.
Risks
- Downside risks predominate:
- Deepening geoeconomic fragmentation could affect external demand.
- Deepening regional conflicts could result in oil price volatility, weighing on India’s fiscal position.
- Domestic risk that private consumption and investment recovery may be weaker if real incomes do not recover sufficiently.
- Weather shocks could adversely impact agricultural output, lifting food prices and weighing on rural consumption recovery.
- Upside:
- Deeper implementation of structural reforms could boost private investment and employment, raising potential growth.
Executive Board assessment and recommendations
- Directors commended prudent macroeconomic policies and reforms that contributed to resilience and made India once again the fastest growing major economy.
- Continued appropriate policies are essential given headwinds from geoeconomic fragmentation and slower domestic demand.
- Fiscal policy:
- Commended adoption of a debt target as the medium-term fiscal anchor.
- Recommended continued, well-calibrated fiscal consolidation over the medium term to rebuild buffers, ease debt service, and reduce debt.
- Suggested greater focus on domestic revenue mobilization and current expenditure rationalization (such as better targeting of subsidies) to create space for growth-enhancing expenditure on infrastructure and health.
- Noted fiscal disparities across states and broadly agreed that a more holistic fiscal framework (including state and central government) and a more detailed fiscal deficit path with sufficient flexibility could be used as an operational guide.
- Monetary and exchange rate policy:
- Welcomed the Reserve Bank of India’s well-calibrated monetary policy with inflation remaining within the target band.
- Noted opportunities could arise to gradually lower the policy rate further; monetary policy should remain data-dependent and well communicated.
- Recommended greater exchange rate flexibility as the first line of defense in absorbing external shocks, with foreign exchange interventions limited to addressing disorderly market conditions; a few Directors saw the need for interventions in other cases given limits in the global financial safety net.
- Financial sector:
- Welcomed the 2024 Financial System Stability Assessment and encouraged using the favorable environment to further strengthen financial resilience.
- Noted pockets of vulnerability from interconnectedness among nonbank financial institutions, banks, and markets, and concentrated exposures to the power and infrastructure sectors.
- Recommended further aligning financial sector regulation, supervision, resolution, and safety net with international standards.
- A number of Directors suggested greater flexibility in priority sector lending.
- Encouraged further improvement of the AML/CFT framework.
- Structural reforms:
- Emphasized comprehensive structural reforms to create high-quality jobs, invigorate investment, and raise potential growth.
- Priorities include implementing labor market reforms, strengthening human capital, and supporting greater participation of women in the labor force.
- Boosting private investment and FDI requires stable policy frameworks, greater ease of doing business, governance reforms, and increased trade integration (including tariff and nontariff reduction measures).
- Welcomed recent tariff reductions as potentially enhancing competitiveness and fostering India’s role in global value chains.
- Commended progress in emission intensity reduction and renewable energy deployment; a balanced climate policy framework and greater access to concessional financing and technology would be key to achieving net zero emissions by 2070.
- Welcomed ongoing capacity development to upgrade the quality, availability, and timeliness of macroeconomic and financial statistics.
Key social and economic indicators (selected, 2020/21–2025/26)
- Real GDP (at market prices), Growth (in percent):
- 2020/21: -5.8
- 2021/22: 9.7
- 2022/23: 7.0
- 2023/24: 8.2
- 2024/25 (Est.): 6.5
- 2025/26 (Projections): 6.5
- Consumer prices - Combined (percent change, period average):
- 2020/21: 6.2
- 2021/22: 5.5
- 2022/23: 6.7
- 2023/24: 5.4
- 2024/25: 4.8
- 2025/26: 4.3
- Gross saving (percent of GDP):
- 2020/21: 29.8
- 2021/22: 30.9
- 2022/23: 31.0
- 2023/24: 32.6
- 2024/25: 32.7
- 2025/26: 32.2
- Gross investment (percent of GDP):
- 2020/21: 28.9
- 2021/22: 32.1
- 2022/23: 33.0
- 2023/24: 33.3
- 2024/25: 33.6
- 2025/26: 33.5
- Central government overall balance (percent of GDP):
- 2020/21: -8.5
- 2021/22: -6.7
- 2022/23: -6.6
- 2023/24: -5.6
- 2024/25: -4.8
- 2025/26: -4.5
- General government overall balance (percent of GDP):
- 2020/21: -12.9
- 2021/22: -9.4
- 2022/23: -9.0
- 2023/24: -8.1
- 2024/25: -7.4
- 2025/26: -7.0
- General government debt (percent of GDP):
- 2020/21: 88.4
- 2021/22: 83.5
- 2022/23: 82.0
- 2023/24: 82.7
- 2024/25: 81.4
- Cyclically adjusted balance (% of potential GDP):
- 2020/21: -7.6
- 2021/22: -7.7
- 2022/23: -8.4
- 2023/24: -8.2
- 2024/25: -7.1
- Cyclically adjusted primary balance (% of potential GDP):
- 2020/21: -2.5
- 2021/22: -2.6
- 2022/23: -3.3
- 2023/24: -2.8
- 2024/25: -2.0
- 2025/26: -1.6
- Broad money (y/y percent change, end-period):
- 2020/21: 12.2
- 2021/22: 8.8
- 2022/23: 9.0
- 2023/24: 11.1
- 2024/25: 10.0
- 2025/26: 10.9
- Domestic Credit (y/y percent change, end-period):
- 2020/21: 9.5
- 2021/22: 13.1
- 2022/23: 12.0
- 2023/24: 11.2
- 2024/25: 11.9
- 91-day treasury bill yield (end-period):
- 2020/21: 3.3
- 2021/22: 3.8
- 2022/23: …
- 10-year government bond yield (end-period):
- 2020/21: 6.3
- 2021/22: 6.9
- 2022/23: 7.3
- 2023/24: 7.1
- Stock market (y/y percent change, end-period):
- 2020/21: 68.0
- 2021/22: 18.3
- 2022/23: 0.7
- 2023/24: 24.9
- Merchandise exports (in billions of U.S. dollars):
- 2020/21: 296.3
- 2021/22: 429.2
- 2022/23: 456.1
- 2023/24: 441.4
- 2024/25: 443.3
- 2025/26: 458.7
- Merchandise imports (in billions of U.S. dollars):
- 2020/21: 398.5
- 2021/22: 618.6
- 2022/23: 721.4
- 2023/24: 686.3
- 2024/25: 728.8
- 2025/26: 768.6
- Terms of trade (G&S, annual percent change):
- 2020/21: 2.0
- 2021/22: -8.7
- 2022/23: -2.7
- 2023/24: 3.2
- 2024/25: -1.3
- 2025/26: 0.2
- Current account balance (in billions of U.S. dollars):
- 2020/21: 24.0
- 2021/22: -38.7
- 2022/23: -67.0
- 2023/24: -26.0
- 2024/25: -34.7
- 2025/26: -53.8
- Current account balance (In percent of GDP):
- 2020/21: 0.9
- 2021/22: -1.2
- 2022/23: -0.7
- 2023/24: -0.9
- Foreign direct investment, net ("-" signifies inflow) (in billions of U.S. dollars):
- 2020/21: -44.0
- 2021/22: -38.6
- 2022/23: -28.0
- 2023/24: -10.1
- 2024/25: 1.9
- 2025/26: -6.4
- Portfolio investment, net (equity and debt, "-" = inflow) (in billions of U.S. dollars):
- 2020/21: -36.1
- 2021/22: 16.8
- 2022/23: 5.2
- 2023/24: -44.1
- 2024/25: -4.6
- 2025/26: -20.4
- Overall balance ("+" signifies balance of payments surplus) (in billions of U.S. dollars):
- 2020/21: 87.3
- 2021/22: 47.5
- 2022/23: -9.1
- 2023/24: 63.7
- 2024/25: 2.8
- 2025/26: 25.0
- Gross reserves (in billions of U.S. dollars, end-period):
- 2020/21: 577.0
- 2021/22: 607.3
- 2022/23: 578.4
- 2023/24: 646.4
- 2024/25: 649.2
- 2025/26: 674.2
- Gross reserves (In months of next year's imports (goods and services)):
- 2020/21: 8.1
- 2021/22: 8.0
- 2022/23: 8.3
- 2023/24: 7.9
- 2024/25: 7.8
- External debt (in billions of U.S. dollars, end-period):
- 2020/21: 573.7
- 2021/22: 619.1
- 2022/23: 624.1
- 2023/24: 668.9
- 2024/25: 726.5
- 2025/26: 787.3
- External debt (percent of GDP, end-period):
- 2020/21: 21.4
- 2021/22: 19.5
- 2022/23: 18.6
- 2023/24: 18.7
- 2024/25: 18.9
- Of which: Short-term debt:
- 2020/21: 8.5
- Ratio of gross reserves to short-term debt (end-period):
- 2020/21: 2.3
- 2021/22: 2.1
- 2022/23: 2.2
- Real effective exchange rate (annual avg. percent change):
- 2020/21: -0.8
- 2021/22: 0.3
- 2022/23: -0.3
- Memorandum item (in percent of GDP) — Fiscal balance under authorities' definition:
- 2020/21: -9.2
- 2021/22: -6.5
- 2022/23: -4.4
IMF Communications Department. February 27, 2025.
