IMF 2025 Article IV Consultation: India Remains Fastest-Growing Major Economy Amidst Global Headwinds
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation, and Infrastructure
Institutions: Ministry of Finance | Reserve Bank of India (RBI)
The International Monetary Fund (IMF) has concluded its 2025 Article IV Consultation with India, projecting a robust economic outlook despite significant external risks. Real GDP is projected to grow at 6.6% in FY2025/26, driven by strong domestic demand and private consumption, before moderating to 6.2% in FY2026/27. The economy has demonstrated remarkable resilience, with real GDP growing at a five-quarter high of 7.8% in Q1 FY2025/26.
An Article IV Consultation is a regular bilateral discussion held between the International Monetary Fund (IMF) and its member countries, typically taking place every year. The process involves the following steps: Staff Visit, Discussions, Report & Review. This mechanism is mandated under Article IV of the IMF’s Articles of Agreement
Inflation and Monetary Policy: Headline inflation has declined significantly, reaching a record low of 0.3% in October 2025, driven primarily by food disinflation and the impact of GST reforms. In response to these benign dynamics, the Reserve Bank of India (RBI) has adopted a neutral monetary policy stance, delivering a cumulative 100 basis points rate cut since February 2025 to support growth. Crucially, the RBI is encouraged to allow greater exchange rate flexibility to absorb external shocks, limiting interventions only to address disorderly market conditions, consistent with the Integrated Policy Framework (IPF).
Fiscal Consolidation and Debt Targets: The report validates the government’s fiscal consolidation path, noting the Central Government’s fiscal deficit target of 4.4% of GDP for FY2025/26 is achievable. A key medium-term anchor is the target to reduce central government debt to 50±1% of GDP by FY2030/31. Recent tax reforms, including GST simplification and Personal Income Tax (PIT) cuts, are expected to boost consumption and ease compliance, further supporting the economic momentum.
External Sector and Structural Reforms: India’s external sector remains resilient with a low current account deficit (0.2% of GDP in Q1 FY2025/26) and robust foreign exchange reserves covering over 8 months of imports. Exports grew by 5.9% YoY in H1 FY2025/26, supported by strong services exports. To achieve “Viksit Bharat” (Developed India) status by 2047, the IMF emphasizes activating all growth engines through reforms in labor markets, land acquisition, and R&D, alongside the successful Production Linked Incentive (PLI) schemes that have mobilized investments in key sectors like pharmaceuticals and mobile manufacturing.
The Integrated Policy Framework (IPF) is an IMF approach to managing macroeconomic stability in open economies. Unlike traditional frameworks that rely primarily on interest rates and flexible exchange rates, the IPF analyzes the optimal mix of monetary policy, exchange rate flexibility, macroprudential measures, and capital flow management. In this report, the IMF advises India to use greater exchange rate flexibility to absorb external shocks, limiting foreign exchange interventions (FXI) only to addressing disorderly market conditions, consistent with IPF principles.
Policy Relevance
The report explicitly links India’s ambition to become an advanced economy with the necessity of “steadfast implementation” of structural reforms. It provides a specific roadmap for navigating geoeconomic fragmentation—such as the potential risk of prolonged 50% U.S. tariffs—by enhancing export competitiveness and diversifying trade partners. Additionally, significant efforts are underway to improve data quality, with rebased national accounts and CPI series expected by February 2026 to aid better policy formulation.
Follow the full report here: IMF Country Report No. 25/314 - India 2025 Article IV Consultation