In the face of shifting global growth trends, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), has praised India as a major global economic growth engine.
Over the longer term, global growth is expected to be about 3%, which is lower than the 3.7% growth rate prior to the pandemic. Over time, global economic patterns have been shifting, with China gradually slowing down and India emerging as a major development engine, according to the IMF chief.
Georgieva’s remarks preceded the annual gathering of central bank governors and finance ministers with the World Bank and IMF in Washington next week.
According to Georgieva, nations have implemented firm economic policies, the private sector has adjusted, and the US tariff crisis has turned out to be less serious than first anticipated.
However, she stated that “global resilience has not yet been fully tested,“ therefore it was too soon to breathe a sigh of relief. There are worrying indications that the test might be forthcoming.
Georgieva stated that “all signs point to a world economy that has generally withstood acute strains from multiple shocks,” citing “improved policy fundamentals,” the private sector’s flexibility, lower-than-expected tariffs, and favorable financial conditions.
She pointed out that although the US effective tariff rate of about 10% is still “far above” the rest of the world, the US tariff rate has decreased from 23% in April to 17.5% today.
However, she cautioned that the full impact of those tariffs “is still to unfold,” and that the global economy’s resilience has not yet been “fully tested.”
In the meantime, India’s growth estimate for FY26 was increased by the World Bank on Tuesday from 6.3% to 6.5%. In the April–June quarter, India’s GDP growth surged to a five-quarter high of 7.8%.
Reserve Bank Governor Sanjay Malhotra announced last week that the RBI has increased its forecast of India’s GDP growth rate from 6.5% to 6.8% for 2025–2026. This is because the implementation of a number of structural reforms that will spur growth, such as simplifying the GST, is anticipated to mitigate some of the negative effects of the external headwinds.
He noted that high private consumption and fixed investment were the main drivers of India’s GDP‘s 7.8% growth in Q1 2025–2026. On the supply side, a resurgence in manufacturing and consistent growth in services drove the 7.6% increase in gross value added (GVA).
High frequency indicators that are now available indicate that economic activity is still robust. According to the RBI Governor, urban demand is gradually increasing while rural demand is still high due to a healthy monsoon and active agriculture.