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The International Monetary Fund (IMF) has projected that India’s economy will expand by 6.6 per cent in 2025, according to its latest World Economic Outlook (WEO) report. The robust performance during the first quarter helped cushion the effects of escalating US tariffs on Indian exports. However, the IMF noted that this estimate is 0.2 percentage points lower than its pre-tariff projection made in October 2024. India’s growth is forecast to surpass China’s 4.8 per cent, reaffirming its position as the world’s fastest-growing major economy. The updated IMF outlook considers the ripple effects of new trade policies and global negotiations taking place amid a climate of heightened uncertainty. Looking ahead, the IMF expects India’s growth to moderate to 6.2 per cent in 2026, citing a potential slowdown in early-year momentum. Domestic Demand Keeps India’s Forecast Steady Despite global headwinds, India’s 2024–25 GDP growth stood at 6.5 per cent in real terms. Government sources quoted by ANI said that the official forecast for 2025–26 remains steady at 6.3–6.8 per cent, driven by resilient domestic consumption and steady investment flows. While the IMF acknowledged tariff-related challenges, it also highlighted that India’s diversified economy and internal demand base have softened the blow. The IMF report emphasised the need for maintaining fiscal prudence and policy stability as key factors supporting growth. Global Growth Slows as Inflation Moderates Globally, the IMF expects world economic growth to reach 3.2 per cent in 2025, slightly easing to 3.1 per cent in 2026, with the impact of tariffs proving smaller than initially anticipated. Inflation is forecast to decline across most economies, though it remains above target levels in the United States. Advanced economies are projected to expand by an average of 1.6 per cent, while emerging markets could grow around 4.2 per cent. The IMF projects the US economy to rise by 1.9 per cent, down from 2.4 per cent in 2024, while Spain is expected to lead advanced economies with a 2.9 per cent growth rate. IMF Calls For Policy Stability And Fiscal Reform In its report, the IMF observed that “the global economy is adjusting to a landscape reshaped by new policy measures. Some extremes of higher tariffs were tempered, thanks to subsequent deals and resets. But the overall environment remains volatile, and temporary factors that supported activity in the first half of 2025, such as front-loading, are fading.” The organisation also warned that “prolonged uncertainty, more protectionism, and labour supply shocks” could dampen future growth, while “fiscal vulnerabilities, potential financial market corrections, and erosion of institutions could threaten stability.” To maintain resilience, the IMF urged governments to restore confidence through “credible, transparent, and sustainable policies” supported by trade diplomacy. It further advised that “fiscal buffers should be rebuilt. Central bank independence should be preserved. Efforts on structural reforms should be redoubled.”
