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India remains the world’s fastest-growing economy with investment and private consumption driving growth, according to the IMF’s latest Regional Economic Outlook for Asia-Pacific.

The IMF, in its World Economic Outlook report released on October 2, had retained India’s gross domestic product (GDP) growth forecasts at a robust 7 per cent and 6.5 per cent for FY25 and FY26, respectively.

While growth in Asia is expected to slow down in 2024 and 2025 — reflecting fading support from the pandemic recovery and factors like ageing — short-term prospects were more favourable than expected in April, the regional economic outlook report said.

IMF said that the growth for the Asia Pacific region in 2024 has been revised up marginally by 0.1 percentage point to 4.6 per cent, primarily reflecting the robust performance early in the year. With this, the Asia and Pacific region are expected to contribute roughly 60 per cent to global growth this year.

However, “the outlook is subject to sizable economic and geopolitical uncertainties,” the report states.

A blog post released by IMF along with the regional outlook report stated that while manufacturing has been the driver of growth in Asia, a transition to modern, tradable services could be a new source of growth and productivity.

It said that the growth of services has already drawn about half of the region’s workers into the sector, up from just 22 per cent in 1990, as hundreds of millions moved from farms and factories.

“This shift is likely to accelerate with further expansion of international trade in modern services such as finance, information, and communication technology, as well as business outsourcing, for example, as already done in India and the Philippines,” the blog post said.

In 2025, more accommodative monetary conditions are expected to support activity, resulting in a slight upward growth revision to 4.4 per cent from 4.3 per cent in April. Inflation has retreated in much of the region. At the same time, risks have increased, reflecting rising geopolitical tensions, uncertainty about the strength of global demand, and potential for financial volatility. Demographic change will act increasingly as a brake on activity, though structural shifts into high-productivity sectors such as tradable services hold promise to sustain robust growth, the report added.