Strong domestic demand, robust investments and reforms to keep India as the global growth leader, says IMF World Economic Outlook
By Economy India | New Delhi | 29 July 2025
📊 IMF Forecast Strengthens India’s Growth Narrative
India is set to retain its title as the world’s fastest-growing major economy, according to the latest World Economic Outlook (WEO) released by the International Monetary Fund (IMF). The report projects India’s real GDP growth at 6.7% in 2025 and 6.4% in 2026, outpacing all other large economies.
“India’s economic fundamentals remain solid, and it continues to drive global growth momentum,” said Pierre-Olivier Gourinchas, IMF’s Chief Economist.
⬆️ Higher Than Global Average
The IMF expects the global economy to grow at a subdued pace of 3.2% in 2025 and 3.1% in 2026. India’s projected growth is more than double the world average, showcasing its economic resilience amid challenging global conditions.
Other major economies’ forecasts:
- 🇨🇳 China: 4.3% in 2025
- 🇺🇸 United States: 2.1% in 2025
- 🇪🇺 Eurozone: 1.6% in 2025
🌍 Drivers of India’s Economic Expansion
IMF attributes India’s robust growth outlook to several factors:
- Strong domestic demand, especially private consumption
- Public capital expenditure on infrastructure, driving multiplier effects
- A buoyant services sector, led by IT, financial services, and tourism
- Gradual export diversification into emerging markets and high-value goods
- Structural reforms improving ease of doing business
💬 IMF Chief Economist’s Remarks
Gourinchas added:
“India’s combination of strong consumption, investment and ongoing structural reforms is creating a virtuous cycle of growth. It is also well-positioned to attract foreign investment.”
🏛️ Indian Government’s Response
The Ministry of Finance welcomed the IMF’s projections. In an official statement, it said:
“The forecast reflects the robust fundamentals of the Indian economy and the success of growth-oriented reforms undertaken in recent years.”
The government reiterated its commitment to maintaining macroeconomic stability while ensuring inclusive growth.
🏦 Investment-Led Growth to Continue
Economists believe India’s capex-heavy Union Budgets in recent years will continue to fuel growth:
- Expansion in highway networks, ports and railways
- Focus on renewable energy infrastructure
- Incentives for domestic manufacturing through PLI (Production-Linked Incentive) schemes
🔎 Risks Highlighted by IMF
Despite the optimistic forecast, IMF flagged certain risks:
- Persistent global inflation and tighter monetary policies
- Potential slowdown in advanced economies, impacting exports
- Geopolitical uncertainties affecting energy prices and supply chains
- Domestic climate-related shocks, including erratic monsoons
🛢️ Impact of Oil Prices
As a major oil importer, India remains vulnerable to fluctuations in global crude prices. IMF cautioned that any sharp spike could widen the current account deficit and put pressure on the rupee.
📈 Employment and Social Impact
IMF’s report notes that India’s sustained growth could generate millions of jobs, especially in manufacturing and services.
- The urban job market is expected to strengthen further
- Expansion in digital economy and startups could create high-skilled employment
- Rural areas may benefit from higher public spending on agriculture and social schemes
🧭 Policy Recommendations
IMF suggested India should focus on:
- Gradual fiscal consolidation, ensuring debt sustainability
- Labour market reforms to boost productivity and formal employment
- Greater investment in green energy to meet climate goals
- Strengthening social safety nets for vulnerable populations
🏢 Private Sector Perspective
Indian industry bodies welcomed the IMF’s projections. CII President R Dinesh said:
“The growth estimates are in line with our expectations. Strong government push in infrastructure and rising private investment will support economic momentum.”
🏦 RBI’s Role
The Reserve Bank of India (RBI) is expected to maintain its focus on bringing inflation closer to the 4% target, even as it supports growth.
- IMF expects India’s inflation to moderate in 2025, aided by better food supply and stable energy prices.
🧾 Foreign Investment Outlook
India’s growth story is attracting foreign capital inflows:
- Sovereign wealth funds and global investors are increasing exposure to Indian equities
- Private equity investments in digital infrastructure, EVs, and renewable energy are on the rise
- Manufacturing giants are shifting supply chains to India as part of China+1 strategies
🔮 Long-Term Outlook
IMF’s medium-term projections show India maintaining a growth trajectory of 6–6.5% through 2028, provided reforms continue.
- Demographic dividend, if leveraged well, could further accelerate growth
- Expansion in healthcare, education and skill development will be key
The IMF’s projection of 6.7% growth in 2025 and 6.4% in 2026 cements India’s status as the engine of global economic growth. While risks remain, the country’s strong fundamentals, reforms, and infrastructure investments are expected to keep it on a high-growth path.
(Economy India)
