CONTEXT

• India is the fastest-growing major economy globally despite global economic uncertainties.
• The World Bank released its June 2025 Global Economic Prospects Report, adjusting India’s FY26 growth forecast.
• Previous forecasts were more optimistic, but mounting global challenges prompted revisions.

CONCEPT

• Economic growth projection: Estimate of the rate at which a country’s GDP will expand.
• Global economic slowdown: Triggered by trade barriers, policy uncertainties, and market instability.
• Trade barrier impact: Affects export-driven economies like India due to reduced global demand.
• Resilience factors: Strong domestic consumption, rural demand, and steady service/construction growth.

CURRENT

• India’s FY26 GDP growth forecast: 6.3%, down from 6.7% projected in January 2025.
• Reason for downgrade:
  • Weakened global demand from key trade partners.
  • Increased global trade restrictions and uncertainty.
• 2024 (FY25) growth: Slowed to 6%, due to a dip in industrial output.
• Positive trends:
  • Construction and services sectors showed consistent growth.
  • Agricultural output rebounded from prior droughts.
  • Rural demand remained strong, supporting overall economic activity.
• South Asia (SAR) outlook: Growth decelerating regionally due to global trade and financial volatility.
• Global growth projection: Expected at 2.3% in 2025, slowest since 2008 outside recessions.
• Growth forecasts have been revised downward in 70% of global economies.
• China’s forecast: 4.5% in 2025 and 4% in 2026 – significantly lower than India.
• India maintains its position as the top-performing large economy, despite external challenges.