Indian Economy Likely To See ‘Little Weaker’ Growth In 2025, Says IMF Chief: Here’s Why

The Indian economy is expected to experience a “little weaker” growth in 2025 despite steady global economic conditions, according to Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF).

Speaking at her annual media roundtable, Georgieva highlighted regional divergences in global growth, uncertainty around U.S. trade policies, and other macroeconomic challenges that could weigh on economies worldwide.  

“While global growth is projected to remain steady, India is expected to see slightly weaker performance,” Georgieva remarked, without providing further details. The IMF’s upcoming World Economic Outlook update is expected to shed light on the factors contributing to this projection.  

The slowdown

The slowdown in India’s growth trajectory aligns with the government’s recent estimates for the fiscal year 2024-25. India’s GDP growth is forecasted at 6.4%, down sharply from 8.2% recorded in FY24, marking a four-year low.

The Reserve Bank of India (RBI) also revised its forecast to 6.6%, reflecting weaker-than-expected performance in key sectors.  

Real Gross Value Added (GVA) is also projected to grow at 6.4% in FY25, compared to 7.2% in FY24. Nominal GVA growth, however, is expected to see a modest increase from 8.5% in FY24 to 9.3% in FY25. 

Here’s Why

Georgieva emphasized growing uncertainty surrounding global economic policies, particularly with the inauguration of Donald Trump as the 47th President of the United States on January 20.

Trump’s announced plans to impose additional tariffs on major trading partners, including China, Canada, and Mexico, are expected to disrupt global trade dynamics.  

“This uncertainty is particularly high around trade policies, adding to the headwinds for countries integrated into global supply chains, especially in Asia and other medium-sized economies,” Georgieva noted.  

While the U.S. economy has performed better than expected, Europe faces stagnation, and China, the world’s second-largest economy, is grappling with deflationary pressures and weak domestic demand. Brazil, on the other hand, is contending with rising inflation.  

India, a major player in global supply chains, could face challenges stemming from heightened trade policy uncertainty and rising long-term global interest rates, Georgieva warned.

However, the IMF expressed optimism regarding inflation trends, noting that disinflation is progressing more swiftly in advanced economies than in emerging markets.  

“The higher interest rates implemented to combat inflation have yielded results without pushing the world into recession,” Georgieva stated. “Headline inflation is converging back to target levels.”  

Experts believe that India’s projected slowdown reflects both external pressures and domestic challenges, including moderating private consumption, slower industrial growth, and global trade headwinds.

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