Syllabus:
GS3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Context:
The International Monetary Fund (IMF) projected India to remain the fastest-growing major economy over the next two years.
More on the News
• According to the April 2025 edition of the IMF’s World Economic Outlook, India’s economy is expected to grow by 6.2 per cent in 2025 and 6.3 per cent in 2026.
- The IMF slashed its global trade outlook, as the US tariff war raises concerns worldwide.
- In April 2025, the US imposed a 27% tariff on Indian goods, later reducing it to 10% for temporary relief.
• The April 2025 edition of the WEO shows a downward revision in the 2025 forecast compared to the January 2025 update because of the impact of heightened global trade tensions and growing uncertainty.
• Despite this slight moderation, the overall outlook remains strong which justifies the strength of India’s macroeconomic fundamentals and its capacity to sustain momentum in a complex international environment.
World Economic Outlook (WEO)
- It is a flagship report by the International Monetary Fund (IMF) published twice a year, with interim updates.
- It provides analysis on global economic trends and policy challenges and covers projections for advanced, emerging, and developing economies.
Key Highlights – April 2025 WEO Edition
- Global economy has entered a phase of cautious stabilisation after years of overlapping shocks.
- Growth remains modest, with downward revisions in global output projections compared to January 2025.
Key contributing factors to the slowdown:
- Steep rise in tariff rates
- Increased policy uncertainty
- Slower progress in international cooperation
Global inflation is expected to decline, but at a slower pace than previously anticipated.
India’s Economic Outlook
• India’s growth outlook is relatively stable compared to the global trend.
• Steady expansion for the Indian economy supported by strong private consumption particularly in rural areas.
• The country’s economy is outpacing many of its global counterparts as it is expected to expand by 6.2 per cent in 2025 and 6.3 per cent in 2026.
- In contrast, the IMF projects global economic growth to be much lower, at 2.8 per cent in 2025 and 3.0 per cent in 2026, highlighting India’s exceptional outperformance.
- China’s GDP growth 2025 forecast downgraded to 4.0% (from 4.6% in January 2025 WEO).
- United States Growth projection revised down to 1.8%.
• With reforms in infrastructure, innovation, and financial inclusion, India continues to enhance its role as a key driver of global economic activity.
International Monetary Fund (IMF)
- The IMF was established in 1944 at the United Nations Bretton Woods Conference in the aftermath of the Great Depression of the 1930s.
- This global organisation aims to achieve sustainable growth and prosperity for all of its 191 member countries by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being.
- It is headquartered in Washington, DC.
• The IMF’s resources mainly come from the money that countries pay as their capital subscription (quotas) when they become members.
- Each member of the IMF is assigned a quota, based broadly on its relative position in the world economy. Countries can then borrow from this pool when they fall into financial difficulty.
UPSC Mains practice Question
Q: In the context of the recent IMF World Economic Outlook (April 2025), critically examine the factors contributing to India’s economic resilience. Also, discuss the challenges that could impact this growth trajectory.
PYQ:
Q. The World Bank and the IMF, collectively known as the Bretton Woods Institutions, are the two inter-governmental pillars supporting the structure of the world’s economic and financial order. Superficially, the World Bank and the IMF exhibit many common characteristics, yet their role, functions and mandate are distinctly different. Elucidate. (2013)