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The International Monetary Fund (IMF) estimates that the Indian economy will grow by 7% this year, a 0.2 percentage point increase from its earlier projection. This growth reflects “improved prospects of private consumption, particularly in rural areas,” aligning with the assessments of other agencies.

While the IMF anticipates stable growth, the Reserve Bank of India (RBI) is grappling with the challenge of achieving final mile disinflation.

Globally, the IMF’s July update of the World Economic Outlook pegs this year’s economic growth at 3.2% and next year’s at 3.3%, consistent with its April assessment. The IMF has raised its growth forecasts for developed economies like France and Spain but has revised its outlook for Japan downward.

The IMF predicts strong growth for the Indian and Chinese economies. However, it has lowered its growth expectations for the Middle East, Central Asia, and parts of Latin America, which are considered emerging markets and developing economies.

The RBI projects India’s growth at 7.2%, slightly higher than the IMF’s estimate. In contrast, rating agencies Crisil and ICRA forecast a slightly lower growth rate of 6.8%. These projections suggest that underlying economic momentum remains healthy.

Progress on disinflation is slowing globally, a concern noted in the IMF’s World Economic Outlook. The risk of rising inflation increases the likelihood of higher interest rates persisting longer.

In June, the United States Federal Reserve chose to maintain its current rates, as committee members opted to wait for “favorable” data indicating that inflation is moving sustainably toward its target. The Fed-dot plot suggests only a 1% rate cut this year, down from the earlier expectation of three cuts.

The European Central Bank (ECB) cut rates in June, but expectations for the July meetings suggest a status quo. The IMF notes that central banks in emerging economies are “cautious” about lowering rates due to potential currency implications.

In India, two members of the Monetary Policy Committee voted for rate cuts, but a policy change appears unlikely in the near term due to uncertainty over inflation trajectory, particularly concerning food inflation.