Indian economy ‘to be a little weaker’ in 2025, IMF warns

Growth in India’s economy is set to slow in 2025, the country’s National Statistics Office (NSO) said in a statement announcing it was lowering its projection to 6.4% from 8.2% growth it predicted in 2023-24.

The NSO’s figures are supported by the latest research from the International Monetary Fund (IMF). In the IMF report, managing director, Kristalina Georgieva said that the Indian economy is expected to be “a little weaker” this year, with an overall steady global growth rate but with a “regional divergence”.

“The US is doing quite a bit better than we expected before, the EU is somewhat stalling, and India is a little weaker,” she said at her annual media round-table at the start of January.

Georgieva added: “What we expect in 2025 is to have quite a lot of uncertainty, especially in terms of economic policies. Not surprisingly, given the size and role of the US economy, there is keen interest globally in the policy directions of the incoming administration, in particular on tariffs, taxes, deregulation and government efficiency.”

US President-elect Donald Trump announced plans to impose additional tariffs on China, Canada and Mexico even before he started his second presidency.

Georgieva said: “This uncertainty is particularly high around the path for trade policy going forward, adding to the headwinds facing the global economy, especially for countries and regions that are more integrated in global supply chains, medium-sized economies, (and) Asia as a region.” She added that the precariousness will be expressed globally through higher long-term interest rates despite declining short-term interest rates.

“As we all recognise, the higher interest rates that were necessary to fight inflation did not push the world economy into recession. They have delivered the desired results. Headline inflation is converging back to target sooner in advanced economies than in emerging markets,” she said.

AI likely to feature strongly in Budget 2025-2026

Artificial intelligence (AI) is likely to be a key focal point in Union Budget 2025-2026, Cabinet sources have told Business Today TV. The insider said the government expected to make a ‘special mention’ of India’s AI capabilities.

In March 2024, the Cabinet approved an allocation of over Rs 10,300 crore (£972,000) for the India AI Mission. This financial investment, spread over the next five years, aims to drive various components of the India AI Mission, including initiatives such as the India AI Compute Capacity, India AI Innovation Centre (IAIC), India AI Datasets Platform, India AI Application Development Initiative, India AI Future Skills, India AI Startup Financing, and Safe & Trusted AI.

The government source also indicated that there could be a specific mention of ‘AI skilling programmes’, developed collaboratively by the Ministry of Finance and the Ministry of Electronics and Information Technology (MEITY). Additionally, there is a proposal from the industry for up to 20% increase in the allocation for the India AI Mission, reflecting the growing demand for AI technology across sectors in India.

Business TV Today was also told that MEITY has proposed the creation of AI innovation hubs and dedicated clusters in major cities to foster entrepreneurship and innovation. In the longer term, the government may also prioritize the integration of AI into public governance systems, including traffic management and disaster response, while introducing a national policy framework to address ethical AI usage, data privacy and intellectual property concerns.

In the lead-up to the Budget, Prime Minister Narendra Modi also engaged with global tech leaders, including Microsoft CEO Satya Nadella, to explore opportunities and emphasize a human-centric approach to AI.

India’s growing focus on AI comes at a pivotal time when global economies are heavily investing in this transformative technology, projected to contribute £12.8 trillion to the global economy by 2030.