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Picture Courtesy: The Hindu

Context:

The International Monetary Fund (IMF), in its October 2025 World Economic Outlook, revised India’s growth projection upward by 20 basis points to 6.6% for 2025, while slightly lowering the estimate for 2026 to 6.2%. 

Current Projection of IMF for India:

• IMF projects world growth at 0% for 2025 and 3.1% in 2026, slightly higher than earlier forecasts. (Source: IMF) 

• Earlier forecasts had India’s growth projected at 2% for 2025 in the April 2025 WEO (World Economic Outlook). (Source: IMF) 

• India is identified as one of the fastest-growing major economies, expected to surpass Japan to become the 4th largest economy in 2025. (Source: IMF and DD News) 

• The IMF suggests that the impact of S. tariffs and trade protectionism has been smaller than expected, due to trade exemptions and adaptive supply chains. (Source: Reuters) 

• IMF cautions that renewed trade tensions or further tariff escalation could shave 3% off global output. (Source: Reuters) 

What is the IMF?

The International Monetary Fund (IMF) is a global financial organization established in 1944 to promote international economic stability, trade, and growth. It currently has 190 member countries.

Its main goal is to ensure the stability of the international monetary system — that is, the system of exchange rates and international payments that enables countries to trade with each other.

Main Functions of the IMF:

• Provides loans to countries facing balance of payments crises (when a country can’t pay for imports or repay debts). 

• Publishes reports like the World Economic Outlook (WEO) and Global Financial Stability Report (GFSR). 

• Offers training and technical assistance to help countries improve financial management, tax systems, and governance. 

India and the IMF:

• India is a founding member of the IMF.
• India’s current growth projection (2025): 6% (IMF estimate).
• India’s quota share: About 7%, giving it a strong voice among emerging economies.
• The IMF supports India in areas like fiscal management, banking reforms, and digital financial inclusion. 

Implication of current projection for India:

• India remains the fastest-growing major economy in the world. Strong growth in manufacturing, construction, and services will attract foreign investment. 

• The global economy is stable but fragile due to trade tensions, geopolitical issues, and high borrowing costs.  

• Opportunity for India to capture supply chains shifting away from China. Indian exporters can benefit by strengthening trade with ASEAN, Africa, and Europe. 

• India may need to maintain a balanced monetary policy—keeping inflation in check while supporting growth. The RBI might adopt a cautious stance on interest rates.
• Sustainable investments in clean energy and green technology. Diversification of exports and strengthening domestic demand. 

Challenges in attaining IMF’s growth projection:

• Rising geopolitical tensions (Ukraine-Russia, Middle East), supply chain disruptions, and fluctuating oil prices continue to impact trade. India’s merchandise exports dropped 5% year-on-year in 2024–25 due to weaker global demand. (Source: Reuters) 

• The government’s push for capital expenditure and welfare schemes increases fiscal burden. India’s fiscal deficit for FY25 is estimated at 1% of GDP, leaving less room for stimulus spending. (Source: The Hindu) 

• Food and fuel prices remain volatile due to uneven monsoons and global oil fluctuations. Retail inflation averaged 3% in FY25, slightly above the RBI’s comfort zone of 4%. (Source: IE)  

• Weak external demand and global trade protectionism are affecting export-oriented industries. Industrial growth slowed to 8% in Q2 2025, compared to 7.6% in Q1. (Source: economic times) 

• Delays in logistics, transport connectivity, and power infrastructure hamper industrial efficiency. Logistics cost in India is ~13% of GDP, higher than China’s 8%. (Source: The Hindu)  

• Unpredictable weather patterns, floods, and heatwaves impact agriculture and energy supply. Agricultural output fell by 2% in FY25 due to erratic rainfall. (Source: TOI) 

Way Forward:

• Boost rural incomes and employment through targeted schemes such as MGNREGA, PM-KISAN, and rural infrastructure development. (Source: The Hindu) 

• Continue investment in highways, railways, logistics parks, and smart cities under the PM Gati Shakti The National Infrastructure Pipeline (NIP) aims to invest ₹111 lakh crore by 2025. (Source: IE)  

• Implement Production-Linked Incentive (PLI) schemes effectively and simplify export procedures. India aims to raise its manufacturing share to 25% of GDP by 2025 under “Make in India”. (Source: economic times) 

• Improve ease of doing business, reduce regulatory hurdles, and offer tax incentives for capital formation. The government targets private investment growth of 10% annually to sustain 6%+ GDP growth. (Source: The Hindu)
• Promote labor-intensive sectors like textiles, MSMEs, food processing, and tourism. MSMEs contribute 30% of GDP and employ over 11 crore workers. (Source: TOI) 

• Expand digital infrastructure, fintech inclusion, and AI-based innovation. The Digital India programme has led to ₹20 lakh crore worth of digital transactions monthly via UPI. (Source: Reuters) 

Source: The Hindu