The impact of the slowing global economic growth is slowly being felt in India now as the growth forecasts have slipped rather sharply in recent reports of global financial institutions. There are several circumstances which are weighing down the growth including tariffs, policy uncertainty, and financial market strains.
Asian Development Bank – The Asian Development Bank (ADB) recently released its Asian Development Outlook (ADO) April 2025 report. As per the report, GDP growth moderated from 9.2% in FY2023 to 6.4% as expansion in industry slowed. Subdued demand for industrial and mining products tamped down growth in manufacturing to 4.3% from 12.3% in FY2023 and in mining to 2.8% from 3.2%. On the other hand, agriculture growth picked up to 4.6% from 2.7% last year, helped by improved weather. Services, which accounts for 50% of GDP, saw continued robust growth at 7.3%, led by financial services; real estate; professional services; and public administration, defense, and other services. GDP growth will rise to 6.7% in FY2025 (which is lower than 7.2% forecast in ADO September 2024 and 7.0% in ADO December 2024, as reported by Asia Law Portal here and here respectively) and 6.8% in FY2026. Growth will be supported by more favorable monetary and fiscal policies, rising rural incomes, and moderating inflation, which will boost consumer confidence. However, net exports will be undermined by global economic uncertainty, notwithstanding robust growth in service exports. On the supply side, the outlook for services remains robust, and the manufacturing outlook will improve, helped by reduction in energy costs.
World Bank – The World Bank recently released its South Asia Development Update April 2025. As per the report, Global growth is showing signs of widespread weakness in 2025. In South Asia too, growth prospects are dimming. Growth outcomes for 2024 have disappointed and forecasts for 2025 have been downgraded for most countries in the region.
In India, growth slowed from 9.2 percent in FY23/24 to an estimated 6.5 percent in FY24/25—the slowest pace in four years, although broadly in line with the economy’s long-term average. The economy was unexpectedly weak around the middle of 2024 but regained its footing by the end of the year. Manufacturing growth was sluggish and public investment growth fell short of budget projections. Consumption growth accelerated thanks to robust employment growth and increasing real wages, particularly in rural areas. Declining food price inflation helped lower headline inflation to 3.6 percent in February 2025, close to the middle of the Reserve Bank of India’s 2–6 percent target range and substantially below the recent peak of 6.2 percent in October 2024. The current account deficit has narrowed to about 1 percent of GDP.
In India, growth in FY24/25 disappointed because of slower growth in private investment and public capital expenditures that did not meet government targets. In its budget for FY24/25, the government announced fiscal consolidation but also tax cuts to support private consumption and regulatory streamlining to spur private investment. GDP growth is expected to slow from 6.5 percent in FY24/25 to 6.3 percent as in FY25/26, which is lower than 6.7% forecasted in the World Bank’s Global Economic Prospects, January 2025 report (reported by Asia Law Portal here). The benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty. Private consumption is expected to benefit from tax cuts, and the improving implementation of public investment plans should boost government investment, but export demand will be constrained by shifts in trade policy and slowing global growth.
International Monetary Fund – The International Monetary Fund (IMF) recently released its World Economic Outlook (WEO) April 2025 report titled ‘A Critical Juncture Amid Policy Shifts’. The report mentions that for India, the growth outlook is relatively more stable at 6.2 percent in 2025, supported by private consumption, particularly in rural areas, but this rate is 0.3 percentage point lower than that in the January 2025 WEO Update (as reported by Asia Law Portal here) on account of higher levels of trade tensions and global uncertainty. It is forecasted to be 6.2% in 2026, which is also slightly lower than 6.5%, as mentioned in the aforesaid the January 2025 WEO Update.
UN Body – The United Nations Conference on Trade and Development (UNCTAD) recently released its Trade and development foresights 2025: Under pressure – uncertainty reshapes global economic prospects (April 2025). As per the report, global growth is expected to slow to 2.3% in 2025, falling below the 2.5% threshold that is often associated with a global recessionary phase. This marks a sharp deceleration compared to the average annual growth rates of the pre-pandemic period, which were already sluggish. Subdued demand, trade policy shocks, financial turbulence and systemic uncertainty are intensifying pressures – especially for developing countries. The outlook is clouded by uncertainty. In early 2025, the Economic Policy Uncertainty Index reached its highest levels this century. UNCTAD estimates that India will grow by 6.5 per cent in 2025 on the back of continued robust public spending and ongoing monetary easing. The decision of the central bank to cut the interest rate by 25 basis points for the first time in five years in early February will support household consumption as well as provide a boost to private investment plans.
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