Economy & BudgetImportant2025-01-14

World Bank Publishes Global Economic Prospects

Q: Which of the following statements is/are correct regarding the Global Economic Prospects report? 1. It is a flagship report published twice a year by the International Monetary Fund (IMF). 2. The January 2025 edition projected India's economic growth to be 6.7% for FY26.

B. 2 only — Statement 1 is incorrect because the Global Economic Prospects report is published biannually (January and June) by the World Bank Group, not the IMF. Statement 2 is correct as the January 2025 report forecasted India's GDP growth at 6.7% for FY26.

In News

What Happened

In January 2025, the World Bank released the latest edition of its Global Economic Prospects report. It projected global economic growth to remain steady at 2.7 percent for 2025 and 2026. India's economy was forecasted to grow at a robust 6.7 percent in both FY26 and FY27, driven by a thriving services sector and a strengthened manufacturing base.

Why It Matters

This projection reaffirms India's status as the fastest-growing major economy and a primary driver of global growth among Emerging Market and Developing Economies. It provides a strong positive signal to foreign investors, highlighting India's resilience despite broader geopolitical uncertainties and sluggish global trade.

Background

History & Context

The Global Economic Prospects is a flagship publication issued twice a year (January and June) by the World Bank Group. It examines global economic developments, prospects, and policies, with a specific focus on Emerging Market and Developing Economies (EMDEs). The January 2025 edition was released against the backdrop of cooling global inflation and major central banks beginning to normalize monetary policy after prolonged tightening.

What Changed

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Global Growth Environment: BEFORE, the global economy faced severe recessionary fears due to aggressive interest rate hikes to combat high inflation. NOW, the report indicates stabilization with global growth steadying at 2.7 percent as inflation cools and central banks ease monetary policy.
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India's Growth Drivers: BEFORE, India's immediate post-pandemic recovery was heavily reliant on government-led capital expenditure. NOW, the report highlights a more broad-based expansion, specifically citing a thriving services sector and a strengthened manufacturing capacity as key engines of growth.
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EMDE Investment Outlook: BEFORE, investment growth in EMDEs was severely constrained by high borrowing costs and widespread debt distress. NOW, while still below pre-pandemic historical averages, investment is expected to show a marginal recovery as global financial conditions gradually loosen.

Prelims Angle

NCERT Connection

This connects to Class 12 Macroeconomics, Chapter 2 (National Income Accounting) and Chapter 6 (Open Economy Macroeconomics). The report illustrates the practical application of Gross Domestic Product (GDP) estimation and demonstrates how global macroeconomic variables impact the domestic performance of an open economy.

Practice Questions

Q1

Correct Statement(s)

Which of the following statements is/are correct regarding the Global Economic Prospects report? 1. It is a flagship report published twice a year by the International Monetary Fund (IMF). 2. The January 2025 edition projected India's economic growth to be 6.7% for FY26.

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