Global Economic Outlook and Implications
There is global anxiety over economic outcomes this year, influenced by policy changes in the United States as Donald Trump begins his second term. The International Monetary Fund (IMF) and the World Bank have released assessments indicating uncertainty beyond U.S. policy changes.
Global Growth Projections
- The IMF projects global growth at 3.3% in 2025.
- The World Bank forecasts a growth rate of 2.7%.
- These rates are below the average growth of the first two decades of the 21st century.
Emerging Markets and Developing Economies (EMDEs)
- Drive 60% of global growth.
- Face slower per capita income growth, affecting their catchup with developed economies.
- This slowdown impacts India's growth outlook.
Indian Economy
- Expected growth rate of 6.4% this financial year, down from 8.2% last year.
- Economists suggest a return to trend growth post-pandemic recovery.
- Policy focus is needed on enhancing medium-term growth potential.
Near-Term Risks
- Protectionist policies could intensify trade tensions and disrupt markets.
- U.S. fiscal policies might temporarily boost its growth but affect global fund flows and the dollar's strength.
- Potential volatility in global financial markets if the U.S. Federal Reserve reevaluates its rate cut stance.
Policy Challenges for India
- Protect financial stability amidst below-trend global growth.
- Monitor currency-market movements; the RBI spent $20 billion to support the rupee in November.
- Allow rupee depreciation to manage external growth challenges effectively.