The International Monetary Fund has upgraded its economic forecast for India for 2024, while warning that growth will dip in the following year.

India — which the IMF had previously called “the world’s fastest-growing major economy” — is expected to grow 7% in 2024, higher than April’s projection of 6.8%. This can be largely attributed to improvements in private consumption, especially in rural parts of the country, the report said.

That’s a big drop from 8.2% growth in the fiscal year from April 2023 to March 2024. Growth will continue to decline and reach 6.5% in 2025, the financial agency said.

The world’s most populous country, which Goldman Sachs says is set to be the world’s second-largest economy by 2075, has been attracting investors like tech giants Apple to Google as the country works toward becoming a manufacturing powerhouse.

“Asia’s emerging market economies remain the main engine for the global economy. Growth in India and China is revised upwards and accounts for almost half of global growth. Yet prospects for the next five years remain weak,” Pierre-Olivier Gourinchas, IMF’s chief economist said.

China’s economy is predicted to grow 5% this year, unchanged from IMF’s May prediction. This is higher than its April projection of 4.6% but lower than the 5.2% expansion in 2023, the IMF said Tuesday.

GDP in the world’s second largest economy is expected to further slow in 2025 to 4.5%, and be on a downward trajectory to 3.3% by 2029, according to the IMF’s latest World Economic Outlook in July.

The rosier forecast for 2024 was in part due to stronger consumer activity and exports in the first quarter of the year, Gourinchas noted.

“The Chinese economy has grown tremendously in the last 15-20 years, and it’s much less reliant overall on the external sector for its growth than it was maybe 15 years ago or 20 years ago,” he said at a press briefing.

“By the very fact that China is also bigger, it means it has a bigger footprint in the rest of the world. An increase in the trade surplus might be small from Chinese perspective, but it could be big from the perspective of the rest of the world.”

Gourinchas pointed out that those projections were made before China’s latest GDP numbers were released.

Ahead of the IMF’s report on Tuesday, Chinese official data showed its economy grew 4.7% year on year in the second quarter — falling below expectations of 5.1% growth by economists polled by Reuters.

“They indicate … that maybe growth in China — in particular consumer confidence and problems in the property sector — are still lingering,” Gourinchas warned. “This is something we flag in our data as a risk to the Chinese economy. And that seems to be perhaps materializing.”

The IMF said it is optimistic on consumption returning in the next few years, but falling birth rates will hinder productivity levels, and in turn slow the economic down.

Growth from both India and China will account for almost half of global growth this year.

Global growth in 2024 is expected to grow at 3.2% — unchanged from its April forecast, and will likely increase slightly to 3.3% in 2025, the IMF said.

The U.S. economy is predicted to inch higher to 2.6% this year compared to 2023, slightly lower than its 2.7% projection in April.

Inflation rate for the world’s largest economy is easing and fell to 3% in June, from 3.3% in May.

Federal Reserve Chair Jerome Powell said Monday that the central bank will not wait until inflation touches 2% to cut interest rates, adding that a “hard landing” for the economy is unlikely in the books.

“It looks like inflation dynamics are moving, at least in the U.S., in the right direction,” Gourinchas said. 

“But we’ve seen bumps in the road, and we should anticipate that maybe there could be more and there could be some delays in pace and the speed at which inflation will be coming down now.”

He highlighted that U.S. public debt remains a grave concern.

Growth in the euro zone for this year has been upgraded to 0.9% — 0.1 percentage point higher than April’s projections, driven by stronger momentum of services and more-than-expected net exports in the first half of 2024.

Growth in the region is predicted to rise to 1.5% in 2025 on the back of increasing real wages and more investments, the IMF said.

“Spain is a bright spot in the euro area in terms of the revisions. We have upgraded the forecast for this year to 2.4%,” Petya Koeva Brooks, deputy director in the research department of the IMF, noted.

“A big part of that revision was due to the outturn that we saw in the first quarter of this year, where there was very strong services, exports, as well as a pickup in investment.”

Clarification: This story has been updated to reflect that IMF’s latest forecast for China’s growth remains unchanged from May.