IMF Praises India’s Resilience Amid Global Uncertainty
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# IMF Praises India’s Resilience Amid Global Uncertainty: Robust Growth, Benign Inflation, but Calls for Deeper ReformsThe International Monetary Fund (IMF) has released its 2025 Article IV Consultation report on India, highlighting the country’s strong economic performance and resilience in the face of external headwinds like prolonged U.S. tariffs and geoeconomic fragmentation. The Executive Board, concluding discussions on November 21, commended India’s sound macroeconomic policies and structural reforms, while urging accelerated efforts to unlock higher potential growth and achieve advanced economy status.
### Recent Performance: Strong Growth and Declining Inflation
India’s economy continues to shine post-pandemic. Real GDP expanded by 6.5% in FY2024/25 (April-March), accelerating to 7.8% y/y in Q1 FY2025/26, driven by robust domestic demand and resilient service exports. Headline inflation has fallen sharply to a 4.6% average in FY2024/25, down to just 1.5% in September 2025 and a record low of 0.3% in October—well below the Reserve Bank of India’s (RBI) 4% target. This benign trend reflects subdued food prices from good harvests, though core inflation ticked up slightly to 4.6%.
The financial sector remains solid, with banks holding strong capital buffers and non-performing assets at multi-year lows. Fiscal consolidation is on track, with the general government deficit narrowing to 7.9% of GDP in FY2024/25, and the current account deficit contained at 0.6% of GDP.
### Outlook: Robust but Moderating Growth Amid Tariff Risks
Under the IMF’s baseline assuming prolonged 50% U.S. tariffs on India (imposed since January 2025), real GDP growth is projected at:
– 6.6% in FY2025/26
– 6.2% in FY2026/27, stabilizing near potential thereafter
Inflation is expected to remain subdued at 2.8% in FY2025/26 (below target due to GST reforms) before converging to 4.0% in FY2026/27. The current account deficit widens modestly to 1.0-1.4% of GDP, financed by FDI and portfolio inflows.
Upside risks include faster trade deals and domestic reforms boosting exports and investment. Downside risks stem from deeper trade fragmentation, tighter global financial conditions, or weather shocks reigniting food inflation.
### Policy Recommendations: Fiscal Discipline, Monetary Flexibility, and Structural Push
**Fiscal Policy:** The IMF endorses this year’s moderate consolidation but urges monitoring the fiscal impact of recent GST simplification and tax cuts. Tariff relief should be targeted and time-bound. For FY2026/27, pause consolidation if tariffs widen the output gap; otherwise, aim for a more ambitious medium-term debt target (post-GDP rebasing in 2026) to rebuild buffers. Focus on revenue mobilization (e.g., broadening tax bases) and expenditure efficiency, including better-targeted social safety nets.
**Monetary and FX Policy:** With benign inflation, there’s scope for further RBI easing if tariffs persist. Enhance transmission to non-banks and allow greater rupee flexibility to absorb shocks, limiting FX intervention to disorderly conditions.
**Financial Sector:** Risks are contained, but monitor NBFC vulnerabilities, concentration, and interconnectedness. Implement 2024 FSAP and FATF recommendations to strengthen oversight.
**Structural Reforms:** To raise potential growth, accelerate labor reforms, boost female participation, invest in human capital, ease business regulations, deepen trade integration, and foster R&D/innovation. Advance green transition with concessional financing to meet climate goals.
### Key Economic Indicators (FY2021/22–2026/27)
– **Real GDP Growth (%):** 9.7 (21/22) → 7.6 (22/23) → 9.2 (23/24) → 6.5 (24/25 est.) → 6.6 (25/26 proj.) → 6.2 (26/27 proj.)
– **Headline CPI Inflation (% avg.):** 5.5 → 6.7 → 5.4 → 4.6 → 2.8 → 4.0
– **General Govt. Deficit (% GDP):** -9.4 → -9.0 → -8.1 → -7.9 → -7.1 → -7.2
– **General Govt. Debt (% GDP):** 83.5 → 82.2 → 80.7 → 81.6 → 81.1 → 80.7
– **Current Account (% GDP):** -1.2 → -2.0 → -0.7 → -0.6 → -1.0 → -1.4
– **Gross Reserves (USD bn, eop):** 607 → 578 → 646 → 668 → 710 → 733
Indian authorities broadly agreed with the assessment but disagreed with the tariff baseline, viewing risks as balanced and growth prospects stronger. They emphasized ongoing reforms in GST, labor, and fiscal transparency.
This report underscores India’s progress while signaling the need for bold steps to navigate global uncertainties and sustain inclusive growth.
**Official Source:**
IMF Country Report No. 25/314
https://www.imf.org/en/Publications/CR/Issues/2025/11/26/India-2025-Article-IV-Consultation-Press-Release-Staff-Report-Staff-Statement-and-Statement-552797
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