Why in news?
The International Monetary Fund’s July 2025 World Economic Outlook update revised India’s growth forecast upward to 6.4% for both financial years 2025–26 and 2026–27. This reinforces India’s position as the world’s fastest‑growing major economy.
About the forecast
The World Economic Outlook (WEO) is the IMF’s flagship report providing global and country‑specific macroeconomic projections. In July 2025 the IMF increased India’s GDP growth estimate by 0.2 percentage points for FY26 and by 0.1 percentage points for FY27 compared with its previous forecast. For calendar year 2025 the projection stands at 6.7%.
Why the upgrade?
- Lower inflation: A decline in food and energy prices has eased cost pressures and boosted consumer demand.
- Improved external environment: Recovery in global trade and more stable financial conditions have supported exports and investment.
- Reform momentum: Continued public investment in infrastructure, progress on labour and land reforms, and an emphasis on skilling have strengthened growth prospects.
- Tariff adjustments: The suspension or reduction of high import tariffs has made intermediate goods cheaper for industry.
Significance
- Macro‑economic resilience: The forecast underscores India’s ability to sustain high growth despite global uncertainties.
- Investor confidence: Upward revisions from the IMF attract foreign investment and can improve India’s sovereign credit rating.
- Policy guidance: Government agencies use IMF projections to plan fiscal policy, set budget targets and align with long‑term visions like NITI Aayog’s Vision 2047.
UPSC relevance
The report is relevant to General Studies papers dealing with international economic institutions and inclusive growth. It helps aspirants understand how macroeconomic indicators like GDP, inflation and investment interact with policy reforms.