Challenges ahead for Indian economy in 2025, IMF forecasts amid global uncertainty

The potential shift in US trade policy is expected to have global repercussions, particularly for countries and regions that are heavily integrated into global supply chains, like India

The International Monetary Fund (IMF) has projected that the Indian economy will experience a slight slowdown in 2025, despite a steady global economic growth outlook. IMF Managing Director Kristalina Georgieva, during her annual media briefing on January 10, noted that while global economic growth is expected to remain stable, significant divergence between regions will likely persist, especially in emerging markets.

Georgieva commented that the Indian economy in 2025 would be "a little weaker," although she did not provide specific reasons for the expected slowdown. She further emphasized that, while the US economy has outperformed earlier forecasts, India’s growth prospects might face challenges. The IMF's forecast anticipates that emerging markets, including India, could experience less robust economic expansion compared to advanced economies, which are starting to see inflationary pressures recede.

In her remarks, Georgieva underlined the critical role of global economic policies in shaping growth in 2025. "What we expect is significant uncertainty, particularly regarding the US trade policy," she said.

US trade policy and global inflation impact

The incoming US administration under President Donald Trump, who will be sworn in on January 20, has already indicated plans to impose additional tariffs on countries like China, Canada, and Mexico. The potential shift in US trade policy is expected to have global repercussions, particularly for countries and regions that are heavily integrated into global supply chains, like India.

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The IMF also highlighted that the global inflation trend is expected to continue moving toward disinflation, with advanced economies likely to reach their inflation targets sooner than emerging markets. Georgieva pointed out that while higher interest rates have been effective in controlling inflation, emerging markets are still grappling with inflationary pressures.

As global economic growth continues to face regional challenges, the IMF forecast indicates that both advanced economies and emerging markets like India must navigate the complex landscape of trade policy changes and inflation control to sustain economic growth in 2025. The US trade policy, in particular, will remain a critical factor influencing global economic performance.