The International Monetary Fund’s October 2025 World Economic Outlook (WEO) has raised India’s growth forecast for 2025 to 6.6%, even as higher U.S. tariffs slow global trade and compress world growth to an estimated 3.2% in 2025. The IMF credits India’s strong private consumption, resilient services sector and stable policy stance for cushioning the economy from external shocks.
Wider global picture: growth slows, protectionism bites
The IMF’s October update paints a world economy that is cooling. Global output is now expected to ease from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026, driven largely by trade frictions and investment uncertainty. The report flags higher U.S. tariffs and rising trade-policy uncertainty as meaningful drags on exports, inventories and business investment across many regions.
Why India stands out
Unlike many export-dependent economies, India’s growth outlook has been lifted to 6.6% for 2025. The IMF points to strong private consumption, robust services activity, and resilient agricultural output as the primary buffers that offset weaker external demand. This upward revision reflects carryover from a strong first quarter and a relatively muted near-term pass-through from higher tariffs.
Monetary and fiscal cushions
The WEO highlights that India’s policy fundamentals—moderate inflation, a steady monetary stance, and relatively contained public finances—helped preserve macro stability. The IMF notes that India’s inflation trajectory and room for calibrated policy action are advantages compared with several advanced economies still grappling with sticky price pressures. Domestic demand-led growth, rather than an overreliance on merchandise exports, has cushioned India from the worst effects of trade shocks.
Sectors to watch
While the headline number underlines resilience, the IMF warns that several export-oriented sectors—textiles, steel, and electronics—could still face pressure if tariffs persist. Conversely, services, construction and consumption-driven retail are likely to remain the main growth engines. The Fund also flagged the risk that prolonged trade fragmentation could raise costs and slow investment over time.
Policy takeaways and risks
The IMF’s central message is cautious: short-term resilience can mask medium-term vulnerabilities if protectionism continues. The WEO recommends predictable, credible policies to preserve investment incentives and to strengthen supply-side capacity. For India, preserving fiscal discipline while supporting growth-friendly reforms will be crucial if external conditions deteriorate.
What this means for India’s outlook
At 6.6% projected growth in 2025, India remains the fastest-growing major economy in the IMF’s outlook—an important signal for investors and policymakers. But the Fund’s cautionary tone on protectionism underlines that favourable domestic momentum should be matched with strategic measures to insulate vulnerable sectors and to attract resilient capital flows.
Sources & further reading
Read the IMF World Economic Outlook, October 2025 for full analysis and data tables. For India-specific commentary and official responses, see press releases from India’s economic agencies.
