Context:
- IMF has cut global growth projections in its April 2025 World Economic Outlook.
- Triggered by:
- U.S. President Donald Trump’s April 2 import tariff policy.
- Surging policy uncertainty worldwide.
Relevance : GS 3(Indian Economy)
Global Growth Projections
- 2025: Global output projected at 2.8%, down 0.5 percentage points from January 2025 forecast.
- 2026: Forecast at 3.0%, down 0.1 percentage points from earlier.
- Marked as a “critical juncture” for the global economy.
Impact on India
- 2025–26 fiscal growth forecast at 6.2%:
- 0.3% lower than January estimate.
- Supported by rural private consumption, despite external challenges.
- 2026–27 forecast: 6.3%.
- Inflation estimates for India:
- 4.2% (FY25–26), 4.1% (FY26–27).
Structural Global Shifts
- IMF Chief Economist: “We are entering a new era.”
- Global economic system of last 80 years is being reset.
- U.S. effective tariff rates now at 100-year highs.
- Tariff hikes + policy unpredictability are shaping the outlook.
Risk Assessment
- Risk of a global downturn has nearly doubled:
- From 17% to 30%.
- IMF does not forecast a full-blown recession but notes elevated risk.
- Growth reductions expected across all regions in 2025–26.
Inflationary Pressures
- Disinflation process stalled due to:
- Trade disruptions.
- Uncertainty over global supply chains and investment decisions.
- Global inflation revised up by 0.1%.
Conclusion
- The IMF signals economic fragbility, warning that trade wars and unpredictability could derail recovery.
- India remains relatively resilient, but exposed to external shocks due to its trade linkages.
