The World Bank revised India’s expected economic growth for 2025-26 from 6.7% to 6.3% which is 0.4% (or 40 basis points) lower than their earlier prediction. The International Monetary Fund (IMF) did something similar earlier, also revised India’s FY24/25 GDP forecast down from 6.5% to 6.2%. .
Reason behind the downgrade:
It is considered that there are 2 main reason behind the India’s downfall.
– One of the reason is global economic weakness. Since growth is slow in big economies like U.S, China and Europe and India is connected to global trade and investment, it gets affected too.
– Secondly persistent policy uncertainty. Investors and businesses are unsure about the future government policies. Like what actions a government might take in the future regarding laws, regulations, taxes, trade, or economic policy — and this uncertainty lasts for a long time which can slow down economic activity because businesses become cautious.
Why lower economic growth forecast matters for a country?
A lower economic growth means experts believe a country’s economy will grow more slowly than previously expected. It can have real, widespread effects on people’s lives, businesses, and the country’s global standing.
– Fewer jobs will be created as in lower economic growth businesses production slow down, so they hire fewer people. They even lay-off workers which increase the unemployment rate.
– Government revenue decreases because when the economy grows slower, tax revenues fall (from income tax, corporate tax, etc.). This makes it harder for the government to spend on healthcare, infrastructure, education, or welfare.
– Investors confidence reduced because when growth slow down investors tend to pull back. Foreign investors may feel it’s too risky or not profitable enough and they might move their money to other countries with stronger prospects.
– Stock markets may decline due to falling share price.
– Businesses may invest less and this will affect the innovation and development of the country.
According to IMF & Bloomberg, India will contribute over 15% of global growth through 2030 and China will contribute 23%o of global growth in the next 5 years (up from 21.7%). Growth is becoming more Asia-centered, because of China and India.
In the financial year 2024–2025, Bangladesh economy is expected to grow by only 3.3%, which is quite low for a developing country and in the year 2025-2026 it is expected to grow by 4.9%
In the financial year 2024–2025, Pakistan’s economy is expected to grow by only 2.7% and in the year 2025-2026 growth is predicted to rise slightly to 3.1%.
The economy of Srilanka is expected to grow by 3.5% in 2025. But in 2026, growth is expected to slow down slightly to 3.1%.
India’s 6.3% growth is relatively strong compared to many other large economies and remains one of the fastest-growing major economies in the world.
