Desk:The International Monetary Fund (IMF) has released a report that could raise concerns for the Indian government. According to the IMF, industrial activities in India have declined more than expected, leading to a slowdown in GDP growth. It is projected that India’s GDP growth will stabilize at 6.5% by 2026.
In 2023, India’s growth rate was 8.2%, which has dropped to 6.5% in 2024. The IMF further stated that India’s growth rate is expected to remain at 6.5% in 2025 and 2026, consistent with earlier projections from October 2024.
Global Economic Outlook
The report highlights that the global economy remains stable but slower than historical averages. Global growth is projected to be 3.3% in 2025 and 2026, lower than the historical average of 3.7% (2000-2019). The forecast for 2025 remains largely unchanged from the October 2024 projections.
The IMF noted that strong growth in the US is offsetting declines in other major economies. Global headline inflation is expected to drop to 4.2% by 2025 and further to 3.5% in 2026. Advanced economies are likely to reach their inflation targets sooner than emerging and developing markets.
US and China’s Economic Performance
The report suggests that demand in the US remains strong, driven by favorable financial conditions and less restrictive monetary policies. US growth is expected to be 2.7% in 2025.
China’s growth rate is projected to reach 4.5% next year, a 0.4% increase from previous estimates.
IMF Chief Economist’s Remarks
Pierre-Olivier Gourinchas, IMF’s Chief Economist, remarked that inflation is expected to decline to 4.2% this year and 3.5% next year. He believes this will help mitigate the global turbulence caused by recent years of economic challenges, including the COVID-19 pandemic and Russia’s invasion of Ukraine, which led to the sharpest rise in inflation in four decades.
Conclusion
The IMF’s report underlines key challenges for India, particularly the sharp slowdown in GDP growth, while the global economy is projected to stabilize at a slower pace. With these projections, policymakers will need to address underlying factors to sustain growth and counter the impact of industrial decline.