IMF holds India growth view at 6.6% for FY25; warns on inflation risks

Mumbai — India is set to remain the world’s fastest-growing major economy with 6.6% expansion in FY25, the International Monetary Fund said in its latest update, citing resilient domestic demand, strong services exports and steady public capital expenditure. The multilateral lender, however, flagged lingering risks from food inflation, uneven monsoon effects and tighter global financial conditions that could weigh on private investment.

According to economists, the projection underscores a familiar policy mix: government-led infrastructure spending, a services surplus powered by software and professional exports, and early signs of a manufacturing pivot under production-linked incentive schemes. Yet job intensity remains the key question. “The challenge is translating growth into broad-based income gains,” a Mumbai-based strategist noted, pointing to wage pressures and elevated living costs for urban households.

Markets will watch the inflation trajectory and the Reserve Bank of India’s guidance after supply-side food shocks kept headline prints sticky through the quarter. A quicker disinflation path could support rate-sensitive sectors and revive housing affordability at the margin. On the external front, trade normalisation and progress on free-trade arrangements could add tailwinds to electronics, pharma and textiles, though global demand remains patchy.

Corporate balance sheets are healthier than in the last capex cycle, banks report improving asset quality, and credit to industry has picked up in pockets such as renewables, defence and transport logistics. Analysts say a convincing, private-sector-led capex acceleration—paired with higher female labour participation and upskilling—would be pivotal to sustain a 6.5–7% path into the late 2020s.

Bottom line: The IMF’s 6.6% call keeps India firmly in the global growth spotlight, but converting macro momentum into jobs, real wages and productivity gains remains the policy test to watch.

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