Page 4 - Policy & Economic Report - June 2025
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POLICY AND ECONOMIC REPORT
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Executive Summary
According to the latest World Economic Situation and Prospects (WESP) update, global growth is forecast
to slow to 2.4 per cent in 2025, down from 2.9 per cent in 2024 and 0.4 percentage points below the
January forecast. This downward revision primarily reflects heightened trade tensions and intensified
policy uncertainty, which are expected to strain global supply chains, raise production costs, and delay
critical investment decisions, besides fueling financial market volatility.
Developed economies are forecast to grow at 1.3 per cent in 2025, down from 1.8 per cent in 2024,
reflecting weakening private investment, trade tensions, and ongoing policy uncertainty. The United
States is projected to grow by 1.6 per cent in 2025, significantly lower than the 2.8 per cent recorded in
2024. This slowdown is attributed to weaker domestic demand, with heightened policy uncertainty
projected to dampen private investment. The European Union economy is projected to grow by 1.0 per
cent in 2025, unchanged from 2024. Key challenges include higher trade barriers, elevated policy
uncertainty and slowing growth in the United States and China. In Developed Asia and the Pacific, global
trade tensions and slowing external demand are dampening growth prospects for 2025. Japan’s economy
is forecast to grow by 0.7 per cent, as subdued consumption continues to weigh on the economy. Australia
is projected to rebound, driven by monetary easing from the Reserve Bank of Australia.
In case of India, the latest Monetary Policy was announced on 6th June 2025 which published the
estimates of NSO; stating that real GDP growth in Q4:2024-25 stood at 7.4 per cent as against 6.4 per cent
in Q3. Real Gross Value Added (GVA) rose by 6.8 per cent in Q4:2024-25. For 2024-25, real GDP growth
was placed at 6.5 per cent, while real GVA recorded a growth of 6.4 per cent.
The following were the key highlights of the meeting: -
• Economic activity continues to maintain the momentum in 2025-26, supported by private
consumption and traction in fixed capital formation.
• Investment activity is expected to improve considering higher capacity utilization, improving
balance sheets of financial and non-financial corporates, and government’s capital expenditure
push.
• Trade policy uncertainty continues to weigh on exports prospects, however the conclusion of free
trade agreement (FTA) with the United Kingdom and progress with other countries is supportive
of trade activity.
• Agriculture prospects remain bright on the back of an above normal south- west monsoon
forecast and resilient allied activities.
• Services sector is expected to maintain its momentum.
• Taking into consideration the above factors the policy projects real GDP growth for 2025-26 is
projected at 6.5 per cent, with Q1 at 6.5 per cent, Q2 at 6.7 per cent, Q3 at 6.6 per cent, and Q4
at 6.3 per cent.
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