India Set to Become the ‘Primary Engine’ of the Global Economy

India is poised to emerge as the primary driver of global economic growth in 2025 and 2026, according to the latest Chief Economists Outlook report from the World Economic Forum (WEF). The report underscores India’s robust economic fundamentals and optimistic outlook, even amid global uncertainties. With the International Monetary Fund (IMF) projecting a GDP growth of 6.2% in 2025 and 6.3% in 2026, India is set to be the fastest-growing major economy in South Asia, playing a crucial role in the region’s economic landscape.

Positive Economic Indicators

The WEF report highlights that India, as the largest economy in South Asia, is expected to be the main engine of growth for the region. Despite challenges such as rerouted Chinese exports, recent data from the purchasing managers’ index (PMI) indicates a better-than-expected performance in new export orders. This suggests a strong demand for goods and services, which is vital for sustaining economic momentum. The report also notes that the recently finalized trade agreement between India and the United Kingdom has further enhanced India’s trade outlook, boosting confidence among economists regarding the region’s economic prospects.

Challenges and Regional Dynamics

While the outlook for India remains positive, the region faces several challenges. The ongoing military tensions between India and Pakistan, which escalated in early May, have contributed to increased uncertainty. Additionally, economists predict that inflation in South Asia will range from moderate to high in the coming months, with 61% anticipating moderate inflation and 26% expecting high inflation. These factors could impact consumer spending and overall economic stability in the region. Nevertheless, one-third of surveyed economists believe that South Asia will experience strong or very strong growth through the remainder of 2025, highlighting the region’s potential.

Global Economic Landscape

On a broader scale, the global economic environment remains fragile. The WEF report indicates a weakening world economy since the start of the year, with particular concern over shifting U.S. economic and trade policies. Approximately 79% of economists surveyed view recent U.S. policy changes as indicative of a long-term structural shift, a significant increase from 61% in late 2024. In April, the U.S. implemented sharp tariff increases on several countries, escalating economic tensions. Although these tariffs have been paused for 90 days, uncertainty about future actions continues to loom, affecting global trade dynamics.

Outlook for India and South Asia

Despite the challenges posed by the global economic landscape, the outlook for India and South Asia remains encouraging. Strong economic indicators, trade agreements, and increasing investor confidence support this positive trajectory. As India gears up to take on a pivotal role in global economic growth, its ability to navigate regional challenges and capitalize on trade opportunities will be crucial in shaping the future of its economy and that of South Asia.

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