IMF Revised Growth Forecast 2025: Global And India Economic Outlook Explained

At a time when there is a critical increase in geopolitical issues and the tariff wars between the US and major economies worldwide are unlikely to end soon, the IMF has revised its growth forecast for 2025, affecting India and most emerging and developed economies.

The World Economic Outlook (WEO) is a flagship report released by the IMF tracking global and regional growth trends. These forecasts serve as a critical barometer for investors, policymakers, and businesses, enabling them to anticipate economic shifts and adjust their strategies accordingly.

According to the latest report, the IMF World Economic Outlook has raised concerns about the ongoing trade tensions and policy uncertainty, which directly point to growing worries about global economic growth. Even though India’s growth estimates were revised, the country remains the bright spot as one of the fastest-growing major economies in the world. 

But what prompted this revision? And what does it mean for India’s trajectory in a slowing global landscape?

This blog decodes the numbers, the narrative, and the broader implications for India and the world.

IMF 2025 Growth Projections: Global And India

The latest projections by the IMF for the international and Indian economy can be best described as ‘cautious’. The IMF has revised its global economic growth forecast for 2025 by 50 basis points to 2.8% from the April estimate (IMF World Economic Outlook April 2025). 

For 2026, it has revised the forecast by 30 basis points to 3.00%. The revision is attributed to escalating trade tensions, high tariff barriers, and tighter financial conditions, especially in advanced economies.

However, as per the IMF growth forecast 2025,  India stands at a unique position during this period. According to the IMF's estimates, India remains one of the fastest-growing economies in the world. The IMF revised its India GDP growth outlook 2025 to 6.2% (from 6.5%). India remains one of the countries with a high growth rate, considering its size and population. 

For FY26, the estimate is 6.3% which puts India ahead of other major economies such as the U.S. (1.8%), the Eurozone (1.5%), and even China (4.0%), reinforcing its role as a key engine of global growth¹.

IMF’s 2025 Outlook For India

The IMF has been largely optimistic about India’s economic growth. This has remained a trend as the forecasts in the past few quarters have been well over 6% estimated (annual) growth rate. For a $4 trillion+ economy, this kind of projection in a highly volatile environment can be nothing short of phenomenal. 

There has been a revision of estimates to 6.2% (for FY 25), but it is largely due to a moderation in global trade and investment flows². However, India’s fundamentals remain robust, and the country is still projected to be the fastest-growing major economy. 

The IMF suggests that the most important reasons for the high forecasts for India can be attributed to resilient private consumption, especially in rural areas, and a stable macroeconomic environment. The IMF also acknowledged that better public sector investment, digital inclusion, and expanding formal employment are key drivers of India’s economic resilience. 

The inflation levels are also expected to be well under control (4.2%). This is supported by recent reports indicating that India experienced its lowest inflation in six years at 2.10%. The improvement in tax collections and the increased number of businesses joining the mainstream due to GST have also contributed to the high growth rates. 

The Indian economy’s growth is not cyclical, but rather a reflection of its structural strengths, including a young workforce, a growing digital economy, and an improving ease of doing business.

What Is Driving The Forecast Change?

There are several reasons why the IMF has revised its forecasts and reduced the estimated growth rate for almost all major economies worldwide. 

Here are some of the critical reasons for the forecast change:

1. Rising Trade Tensions: The IMF flagged global trade protectionism, particularly US-China trade tensions 2025, as a key reason behind the downgrade. Tariff levels are at century highs.
2. Policy Uncertainty: Mixed signals on fiscal policy and central bank independence in major economies have created investor unease.
3. Slower Global Demand: Weak business investment and manufacturing activity in the U.S., EU, and China are weighing on global output. It has resulted in creating a massive economic slowdown in 2025, something further exaggerated by geopolitical tensions.
4. India’s Modest Downgrade: India’s forecast was downgraded from 6.5% to 6.2%, largely due to external risks, rather than domestic weakness.
5. Cushion From Domestic Demand: India’s strong consumption, infrastructure push, and macro stability offer insulation from global shocks.
6. Capital Flow Risks: Global tightening may lead to volatile capital flows and risk aversion toward emerging markets.
7. Persistent Inflation Concerns: Although easing, inflation remains a concern in some regions, limiting the room for monetary policy.

Implications For Investors And The Indian Economy

Impact Of Slower Global Growth On Trade And FDI

The reduced estimates for the global economies can have a direct impact on the export-oriented units in India. This can also harm the FDI volumes in India. Sectors reliant on global trade, such as IT, textiles, and automotive components, could face near-term headwinds. With tighter global financial conditions, there might be capital flow volatility and short-term pressure on Indian equity and currency markets.

How Policy Reforms Will Drive India’s Growth Resilience

India’s domestic markets are quite robust, and the policy momentum will provide a cushion. There is a critical increase in infrastructure development and public spending, along with improved digital inclusion and steady inflation management. These reforms not only boost internal demand but also sustain investor confidence. With such policies, India can position itself as a relatively stable and high-growth destination, even when overall international conditions remain uncertain. 

Conclusion

While the IMF’s global forecast reflects rising uncertainties, India’s stable macroeconomic fundamentals and reform-driven momentum offer resilience. As the world economy slows, India remains well-positioned to lead growth among major emerging markets. After Trump’s recent announcements, it will be interesting to notice the impact of tariffs on the global economy and particularly on the emerging markets. 

There is no doubt that the global slowdown will influence the country’s growth estimates. Still, at the same time, the fundamentals of the economy and the policy outlook of the Indian government have been quite robust. 

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Frequently Asked Questions

1. Why did the IMF lower its global growth forecast for 2025?

The IMF revised its global growth forecast to 2.8% due to rising trade tensions, tariff barriers, and policy uncertainty in major economies, including the U.S. and China.

2. How does India’s growth forecast compare globally?

At 6.2%, India is projected to remain the fastest-growing major economy, outperforming its peers, including China (4%) and the U.S. (1.8%).

3. What does the revised forecast mean for Indian investors?

While global slowdown may impact exports and FDI, India’s strong domestic demand and reform momentum continue to support a positive investment outlook.

References:
1. Money Control, accessed from: https://www.moneycontrol.com/world/un-projects-india-s-2025-growth-at-6-3-among-fastest-growing-economies-ahead-of-china-us-and-eu-article-13030077.html

2. Angel One, accessed from: https://www.angelone.in/news/india-s-gdp-growth-forecast-lowered-to-6-2-for-fy26-by-icra-down-from-6-5-in-fy25

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