IMF'S GRIM FORECAST

DENSE GLOBAL SUPPLY CHAINS, WORLD ECONOMIC OUTLOOK SAYS, CAN MAGNIFY THE EFFECTS OF TARIFFS AND UNCERTAINTY

- Shivaji Sarkar

The US tariff war resetting the world order of 80 years slows down global growth to 2.8 percent in 2025, down from January forecast of 3.3 percent says the World Economic Outlook (WEO) of International Monetary Fund (IMF).

The IMF seemingly has a grim forecast as it foresees repetition of the Great Depression (GD) or worse, as the US effective tariff rate surged past levels reached during the GD while counter-responses from major trading partners significantly pushed up the global rate. The world may be in turmoil as the US may plunge into severe slowdown with its growth plunging to 1.8 percent, a 90-basis point loss. The problems could surpass the economic trouble to worsening trade tensions, a hint towards a bigger political conflict.

For India, however, the growth outlook is relatively more stable. The IMF projects steady expansion for the Indian economy, supported by firm private consumption, particularly in rural areas.

Despite these revisions, India’s robust growth trajectory continues to set it apart on the global stage. The projections could change the global investment pattern. It might create an additional interest for India despite the capital flight witnessed in the country’s bourses, falling rupee against the dollar and surging gold and silver prices. The rupee could fall further as the WEO says the US benefits as tariffing country in the dollar appreciating further. This apart global investment scenario could face difficulties adding to the problems in the Indian market.