New Delhi, October 15, 2025: India will continue to hold its position as the world’s fastest-growing major economy, according to the International Monetary Fund’s (IMF) latest World Economic Outlook (WEO) report released on Tuesday. The report upgrades India’s projected GDP growth for FY 2025–26 to 6.6%, up 20 basis points from its July 2025 projection, reflecting resilience in domestic demand, investment momentum, and a stronger-than-expected first-quarter performance.
The revision comes despite escalating global trade tensions, tariff uncertainties, and slowing growth among advanced economies. The IMF’s upward revision underscores India’s relative strength in a turbulent global landscape marked by economic fragmentation, policy uncertainty, and geopolitical disruptions.
In comparison, India’s central bank — the Reserve Bank of India (RBI) — in its Monetary Policy Committee (MPC)meeting earlier this month, projected growth at 6.8%, slightly above the IMF estimate. The IMF also adjusted its projection for FY 2026–27 downward to 6.2%, 20 basis points below the July forecast, citing the possibility of global headwinds and tighter external conditions over the medium term.
India’s Growth Momentum Amid Tariff Challenges
The IMF attributed India’s strong growth outlook primarily to the “carryover from a robust first quarter”, which helped offset the impact of increased US tariffs on Indian imports since July 2025. The report noted that despite the trade headwinds, India’s domestic economy continues to benefit from strong consumption, public investment, and declining inflationary pressures.
The WEO report also highlighted that inflation in India “surprised on the downside,” easing faster than expected amid moderating food and fuel prices. This trend has provided room for the RBI to maintain a growth-supportive stance while remaining cautious about imported inflation risks and global energy volatility.
However, the IMF’s findings also draw attention to the sharp rise in effective tariff rates faced by Indian exports to the United States. As of October 2025, the report estimates the rate at 35.8%, the second-highest among major trading nations after China. This steep rate reflects the additional 25% tariff imposed by US President Donald Trump earlier this year in retaliation for India’s continued imports of discounted Russian oil.
Interestingly, while Washington justified the tariffs on geopolitical grounds, China — which purchases a larger volume of Russian oil than India — has not been subject to similar sanctions. The asymmetry, analysts suggest, reflects both the complexity of US trade politics and the shifting priorities of American trade policy in an election year.
Global Growth Landscape: India Shines Amid Uneven Recovery
In the broader global context, the IMF projects uneven recovery across major economies for 2025. The United States is expected to grow at 2%, China at 4.8%, and the Euro Area at 1.2%, while Emerging Market and Developing Economies (EMDEs) are forecast to expand by 4.2%.
Notably, except for China — whose growth projection remains unchanged from July — all other major economies, including India, have seen upward revisions. The marginal upgrade in global growth from 3% in July to 3.2% in October reflects stronger-than-expected performance in parts of Asia and North America, even as global trade volumes remain subdued.
The IMF’s Chief Economist Pierre-Olivier Gourinchas cautioned against complacency, warning that it would be “premature and incorrect” to conclude that the recent tariff surge led by the United States has had no adverse impact on global growth.
In a blog post accompanying the report, Gourinchas wrote that while headline global growth numbers appear stable, “importers may be passing tariff costs to consumers, leading to higher domestic prices and efficiency losses.” He further noted that trade may be permanently re-routed to bypass tariff barriers, a process that could “undermine long-term productivity and distort global supply chains.”
AI Boom, Chinese Structural Risks, and Fiscal Fragilities
Beyond trade tensions, the WEO identified several emerging structural risks that could weigh on the global economy over the next few years. Chief among them is the rapid expansion of artificial intelligence (AI), which, while transformative, has generated what the IMF termed an “exuberance reminiscent of the dotcom bubble.”
According to the report, the global economy faces a dual challenge: managing the short-term volatility stemming from speculative investment in AI technologies, while also harnessing its long-term productivity potential. The IMF acknowledges AI’s capacity to raise output and efficiency, but cautions that without robust regulatory frameworks and equitable access, it may widen income inequality and concentrate economic power.
The report also underscores growing structural distress in China’s economy, citing persistent weakness in its property sector, slowing domestic demand, and rising local government debt as major drags on growth. These vulnerabilities, coupled with fiscal stress in advanced economies and eroding institutional credibility in several democracies, form a web of downside risks that could amplify global volatility.
The IMF’s Prescription: Clarity, Stability, and Cooperation
Amid these challenges, the IMF’s central message is clear: restoring policy predictability and international coordination is crucial to sustaining growth. The WEO urges governments to resolve policy uncertainty through “clearer and more stable bilateral and multilateral trade agreements”, which it estimates could boost global output by 0.4%in the near term.
A complete rollback to the low-tariff environment that prevailed before January 2025, the report adds, could contribute an additional 0.3% increase in global GDP. The IMF emphasizes that trade liberalization, supported by rules-based frameworks, can reignite investment, stabilize markets, and foster long-term productivity gains.
“The task ahead,” the report states, “is to restore confidence through credible, predictable, and sustainable policy actions. Policymakers should establish clear, transparent, and rules-based trade policy roadmaps to reduce uncertainty, support investment, and reap the productivity and growth benefits that more trade brings.”
This policy prescription echoes the Fund’s broader warning against economic nationalism and protectionism, which have resurfaced globally in recent years. The IMF insists that a retreat from multilateral cooperation — as seen in the ongoing tariff wars — risks fragmenting global production networks and undermining the very foundation of post-pandemic recovery.
Implications for India
For India, the IMF’s upgraded outlook reinforces its status as a key driver of global growth. The report acknowledges that India’s macroeconomic fundamentals remain strong, supported by robust tax collections, infrastructure spending, and digital transformation initiatives.
However, it also cautions that export competitiveness could be constrained by high external tariffs and slowing demand in advanced economies. The IMF advises India to deepen structural reforms, improve labor productivity, and enhance trade logistics to sustain momentum.
Domestically, analysts view the IMF’s assessment as a vote of confidence in India’s growth model — one driven by domestic consumption and public investment rather than external demand. Yet, the challenge remains to translate this growth into broad-based employment and income gains, particularly in manufacturing and services sectors most exposed to global trade frictions.
As the world grapples with fragmented supply chains, tariff walls, and shifting alliances, India’s ability to balance domestic resilience with external adaptability will determine whether its current growth trajectory can be sustained.
Conclusion
The IMF’s October 2025 World Economic Outlook offers a cautiously optimistic picture: India’s economy is outperforming expectations, even as global conditions grow more uncertain. With the United States tightening tariffs, China navigating deep structural challenges, and Europe struggling with stagnation, India stands out as a rare bright spotin an otherwise uneven global recovery.
But the Fund’s warning is unmistakable — the resilience of economies like India’s cannot substitute for a coordinated global strategy. Without policy stability, trade clarity, and international cooperation, even the fastest-growing economies could face turbulence ahead.
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