Winning Bizness Desk

Mumbai. The International Monetary Fund (IMF) has adjusted India's GDP growth forecast downward, citing escalating global trade tensions. For the fiscal year 2025-26, the IMF now projects a growth rate of 6.2%, a decrease from the earlier estimate of 6.5%. Similarly, for 2026-27, the forecast has been reduced to 6.3% from the previous 6.5% projection. These revisions reflect concerns over the potential impact of increased tariffs and global economic uncertainties on India's economic trajectory.

Impact of U.S. Tariff Policies

The downward revision is largely attributed to the recent implementation of significant tariffs by the United States under President Donald Trump's administration. These tariffs, described by the IMF as a "major negative shock" to the global economy, have led to a reassessment of growth prospects worldwide. The IMF warns that such protectionist measures could further dampen economic activity, increase financial market volatility, and tighten financial conditions globally.

India's Relative Insulation and Domestic Strength

Despite the global headwinds, India remains somewhat insulated due to its relatively low reliance on external demand. Fitch Ratings maintains a positive outlook, projecting a 6.5% growth rate for India in FY26, citing strong domestic consumption and investment. Similarly, Moody's anticipates India's GDP growth to surpass 6.5% in FY26, driven by government capital expenditure, tax cuts, and interest rate reductions.

Broader Global Economic Slowdown

The IMF's latest World Economic Outlook indicates a broader global economic slowdown, with worldwide growth expectations cut to 2.8% for 2025, down from 3.3% in 2024. The U.S. economy is projected to grow by only 1.8% in 2025, a full percentage point lower than the previous year, making it a significant drag on global growth prospects.

Policy Responses and Future Outlook

In response to the challenging global environment, India is expected to continue focusing on strengthening domestic demand through fiscal measures and monetary easing. The Reserve Bank of India is anticipated to commence rate cuts in April 2025, provided inflation shows signs of moderation. These policy responses aim to bolster economic resilience and sustain growth momentum in the face of external uncertainties.

Key Takeaways:

• IMF lowers India's FY26 GDP growth forecast to 6.2% from 6.5%.
• U.S. tariffs under President Trump contribute to global economic slowdown.
• India's economy remains relatively insulated due to strong domestic demand.
• Fitch and Moody's maintain positive growth projections for India.
• Global growth expectations reduced to 2.8% for 2025.
• U.S. economy projected to grow by only 1.8% in 2025.
• India expected to implement fiscal and monetary measures to sustain growth.