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The growth projections of the World Bank and IMF for the current fiscal is lower than the Reserve Bank of India’s forecast of 6.5 per cent announced earlier this month
The World Bank on Wednesday cut India’s growth forecast for the current fiscal year 2025-26 (FY26) by 40 basis points (bps) to 6.3 per cent.
“In India, growth is expected to slow from 6.5 per cent in FY24/25 to 6.3 per cent in FY25/26, as the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty,” the multilateral agency said in its latest South Asia Development Update.
In October 2024, the World Bank had projected a higher growth rate of 6.7 per cent.
On Tuesday, citing tariff tension as a key factor, the International Monetary Fund (IMF) lowered the growth forecast for India for FY26 and (FY27 by 30 bps and 20 bps, respectively.
In January, the IMF had projected a growth rate of 6.5 per cent for both FY 26 and FY 27. Now, the growth rate is expected to be 6.2 per cent for the current fiscal and 6.3 per cent for the next fiscal.
The growth projections from the World Bank and IMF for the current fiscal year is lower than the Reserve Bank of India’s (RBI) recent forecast of 6.5 per cent, which itself was revised down from 6.7 per cent, earlier this month. However, these projections are close to the lower band of the forecast range (6-3-6.8 per cent) given by the Economic Survey.
Meanwhile, talking about India, the World Bank highlighted that growth in FY24/25 fell short of expectations due to slower growth in private investment and public capital expenditures which did not meet government targets.
In its FY24/25 Budget, the government had announced fiscal consolidation measures alongside tax cuts to support private consumption and regulatory streamlining to spur private investment. However, during the current fiscal, the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainties.
“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,” it said.
Talking about currency, the report highlighted that the Indian rupee’s value in terms of the US dollar held steady between mid-2022 and end-2024, partly supported by foreign exchange market intervention by the central bank. It has fallen by about 2 per cent so far this year, more than the average depreciation of the currencies of EMDEs with flexible exchange rates.
India’s equity markets have grown rapidly in recent years, in terms of both listings and valuations, and have attracted significant, although volatile, net inflows.
In 2024, India led the world in the number of initial public offerings (IPOs) and was second only to the US in the value of new listings. Equity derivatives markets have grown particularly quickly, prompting interventions from regulators concerned about investor protection. Since peaking late last year, stock market valuations have undergone a correction. For now, “this has not had broader ripple effects, but the decline in equity prices could dampen private consumption or investment over the medium term,” the report stated.
Published on April 23, 2025
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