Key Highlights

• World Bank slashes 2025 global growth forecast to 2.3%, citing intensifying trade tensions and tariffs.
• India’s growth trimmed to 6.3%; China downgraded to 4.5%, both hit by tariffs and economic headwinds.

India's economic situation appears to be stable at the moment, but changing global trade policies and rising tensions with major partners such as the United States will shape the economy's direction in the coming months.

Global growth is predicted to be limited to 2.3% this year, the lowest rate since 2008 (excluding global recessions), due to escalating trade tensions and policy uncertainty. The estimate was 2.7% in January. The World Bank has warned that human living standards will drastically decline if immediate action is not taken.

With the exception of complete global recessions, the World Bank's most recent Global Economic Prospects report predicts that increased trade tensions and policy uncertainty will cause global growth to slow this year to its slowest level since 2008.

The report claims that the unrest has lowered growth projections in almost 70% of economies worldwide, spanning all regions and income brackets.

After unexpectedly weak growth of 6% in 2024, activity in South Asia (SAR) is slowing due to rising global trade barriers, increased policy uncertainty, and financial market volatility, the report said.

Also Read: India Records 7.4% GDP Growth in Q4 FY25; Annual Growth Estimated at 6.5% 

World Bank On India's GDP

India will remain the global major economy with the highest growth rate but the World Bank reduced its projection of the economic growth in 2025 2026 to 6.3 due to export pressure caused by global uncertainties.

In April, the World Bank decreased its growth forecast of India in 2025-2026 to 6.3 percent, downwards revision of its January estimation of 6.7 percent growth.

The report states that slowdown in the growth of industrial output was one of the reasons which led to the slowdown in the growth of India in FY2024-25 (April 2024 to March 2025).

But owing to robust demand in the countryside, the agricultural performance rebounded in the face of severe drought, and expansion in the construction and service sector activity remained robust.

The report forecasts India to stay as the quickest developing of the biggest economies in the world, at 6.3 percent in FY20252026.

However, the World Bank has lowered its growth forecast to FY2025-26 by 0.4 percentage points since January, primarily owing to the slowdown in activity in major trading partners in addition to the increasing obstacles to international trade as the prime export preventatives.

Reserve Bank of India last week kept its GDP growth projections of the current fiscal unchanged at 6.5 percent, saying that the Indian economy was resilient, strong and had potential to grow amidst global uncertainty.

The World Bank estimates China will grow by 4.5 percent in 2025 and 4 percent in 2026.