Context:
The International Monetary Fund (IMF), in its October 2025 World Economic Outlook, revised India’s GDP growth forecast to 6.6% for 2025 (up by 20 basis points) while slightly reducing the 2026 projection to 6.2%. This reflects sustained domestic strength despite global uncertainties and trade disruptions.
Key Highlights / Details:
- Upward Revision for 2025:
- India’s growth projection for 2025 has been raised to 6.6% from 6.4%.
- The revision is driven by a carry-over effect of robust growth in the first quarter (Q1 FY2025), where GDP growth reached 7.8%, a five-quarter high.
- Strong performance was led by the manufacturing, services, and construction sectors.
- Downward Revision for 2026:
- The IMF revised India’s 2026 forecast down to 6.2%, expecting some fading of Q1 momentum and normalization of growth rates.
- Global Outlook:
- The IMF projected global growth at 3.2% in 2025, up by 20 basis points, with 2026 remaining unchanged at 3.1%.
- Global slowdown risks stem from protectionism, trade uncertainties, and geopolitical tensions.
- Impact of U.S. Tariff Regime:
- The IMF noted that the U.S. tariff measures introduced since July (under the Trump administration) had a smaller-than-anticipated impact on India’s economy.
- India’s strong domestic demand and sectoral resilience offset these trade shocks.
Relevant Prelims Points:
- IMF Headquarters: Washington, D.C.
- Key Reports: World Economic Outlook (WEO), Global Financial Stability Report (GFSR), and Fiscal Monitor.
- IMF Membership: 190 countries; India is a founding member (since 1945).
- Basis Point (bps): 1 bps = 0.01%; 100 bps = 1%.
Relevant Mains Points:
- Economy & Growth Drivers: Domestic consumption, manufacturing push, and infrastructure investment continue to sustain India’s high growth trajectory.
- Global Context: Despite protectionist trends, India remains a bright spot in global growth.
- Policy Implications: Emphasis on structural reforms, fiscal prudence, and global trade diversification.
- Economic Diplomacy: India’s ability to maintain resilience despite tariff shocks reflects its growing global economic stature.