Context:
The World Bank has revised India’s GDP growth forecast downward for FY2025, citing a mix of global economic weakness and domestic policy uncertainty. The downgrade aligns with similar projections by the International Monetary Fund (IMF), indicating growing caution about India’s short-term economic trajectory.
Key Highlights
- Revised GDP Forecast for FY25: Lowered to 6.3%, down 40 basis points from the previous estimate of 6.7%
- Growth in FY24: Estimated at 6.5%, impacted by sluggish private investment and underperforming public capital expenditure
- FY26 Outlook: Projected to remain stagnant at 6.3%, suggesting limited recovery momentum
Primary Drivers of the Downward Revision
- Private Investment Slowdown: Despite monetary easing and regulatory reforms, private sector response remains tepid
- Public Capex Misses Targets: Government’s capital expenditure did not meet planned levels, affecting overall investment climate
- Global Economic Weakness: Continued global headwinds, including geopolitical instability and slowing trade, are weighing on export-driven sectors
- Policy Uncertainty: Ambiguity surrounding policy continuity and regulatory clarity is deterring long-term investment
IMF Also Revises India’s Growth Outlook
The IMF cut its FY25 GDP forecast to 6.2% from its earlier estimate of 6.5%, echoing the World Bank’s concerns
Outlook and Implications
While India remains one of the fastest-growing major economies, persistent external challenges and internal inefficiencies could constrain potential output
Policymakers may need to accelerate structural reforms, stimulate private investment, and ensure execution of public infrastructure projects to revive momentum
