IMF Board concludes 2025 Article IV Consultation with India, projects strong growth but warns of emerging risks
Washington, D.C., November 26, 2025 — India’s economy is set to maintain robust momentum despite global headwinds, the International Monetary Fund (IMF) said as its Executive Board concluded the 2025 Article IV Consultation for the country. The assessment paints a broadly positive picture of growth, inflation, and financial stability, while cautioning that geoeconomic tensions, tariff pressures, and climate-related shocks pose significant near-term risks.
Growth Remains Strong, Inflation Eases
India recorded 6.5% growth in FY2024/25, with economic activity accelerating to 7.8% in the first quarter of FY2025/26. The IMF credits the performance to strong domestic demand and improved macroeconomic management.
Under the Fund’s baseline scenario—one that assumes prolonged 50% U.S. tariffs on certain Indian exports—real GDP growth is expected to reach 6.6% in FY2025/26 before moderating slightly to 6.2% in FY2026/27.
Inflation has cooled significantly. Consumer price inflation is projected to drop from 4.6% in FY2024/25 to 2.8% in FY2025/26, supported by subdued food prices and the one-off effects of a recent Goods and Services Tax (GST) reform.
Financial System Sound; Fiscal Consolidation on Track
The Fund highlighted continued resilience in India’s financial and corporate sectors, noting strong capital buffers, multi-year lows in non-performing assets, and steady liquidity. Credit growth is expected to remain robust, with domestic credit projected to expand 10.8% in FY2025/26.
Fiscal consolidation has progressed, with the central government’s deficit shrinking from –6.7% of GDP in FY2021/22 to –4.9% in FY2024/25, and set to narrow further to –4.5% in FY2025/26. General government debt is projected to stabilize at around 81% of GDP this fiscal year.
However, the IMF cautioned that achieving deficit targets will require “strong spending discipline,” and it urged authorities to closely monitor the fiscal impact of recent GST and income-tax rate reductions.
Trade and External Sector: Buffers Strong, CAD Stable
Despite external pressures, India’s external position remains relatively stable. The current account deficit (CAD) was –0.6% of GDP in FY2024/25 and is projected to widen modestly to –1.0% in FY2025/26 amid softer merchandise exports.
Foreign exchange reserves continue to provide strong cover, rising to $668 billion in FY2024/25 and projected to reach $709.6 billion this fiscal year—equivalent to 8.4 months of imports.
External debt remains manageable at 19.2% of GDP.
IMF Board Praises India’s Reforms, Urges Continued Momentum
Executive Directors commended India’s “very strong economic performance and resilience,” citing the benefits of structural reforms and stable macroeconomic policy. They endorsed the Reserve Bank of India’s data-dependent monetary stance and noted that if current tariffs persist, “there would likely be scope for further monetary easing” given benign inflation.
The Board called for:
- Targeted and timebound tariff relief measures
- More ambitious medium-term fiscal targets, especially after next year’s GDP rebasing
- Stronger fiscal sustainability at the state level
- Enhanced monetary transmission and greater exchange rate flexibility
- Close monitoring of non-bank financial institutions
Structural Reforms Key to Long-Term Ambitions
The Directors stressed that India’s goal of becoming an advanced economy hinges on comprehensive structural reforms. They urged:
- Continued progress on labor market reforms
- Policies to boost female labor force participation
- Higher investment in human capital
- A sustained public investment push
- Improvements in ease of doing business and FDI climate
- Deepening trade integration to offset tariff pressures
- Greater support for green transition initiatives, including access to concessional financing
Risks Tilted to the Downside
The IMF warned of several key risks to India’s outlook:
- Geoeconomic fragmentation, which could weaken trade, raise input costs, and slow investment
- Climate- and weather-related shocks that threaten agricultural output and could reignite inflation
- Financial spillovers from global tightening cycles
On the upside, new trade agreements and faster domestic reforms could lift exports, investment, and employment.
Key Data at a Glance (IMF Table Highlights)
| Indicator | FY2024/25 | FY2025/26 (Proj.) | FY2026/27 (Proj.) |
| Real GDP Growth | 6.5% | 6.6% | 6.2% |
| CPI Inflation | 4.6% | 2.8% | 4.0% |
| Central Gov’t Deficit (% of GDP) | –4.9% | –4.5% | –4.5% |
| Current Account Balance (% of GDP) | –0.6% | –1.0% | –1.4% |
| FX Reserves | $668B | $709.6B | $733.4B |
| External Debt (% of GDP) | 18.8% | 19.2% | 19.0% |
The IMF’s 2025 consultation underscores India’s strong economic footing—powered by resilient demand, stable inflation, and sound financial institutions. But it also makes clear that sustaining growth amid global turbulence will require disciplined fiscal policy, enhanced monetary transmission, and fast-tracked structural reforms. With both opportunities and risks ahead, policymakers face a pivotal moment to anchor long-term development and secure India’s path toward advanced economy status.
