Economy & BudgetImportant2025-06-10

World Bank Releases Global Economic Prospects

In News

What Happened

On June 10, 2025, the World Bank released its semi-annual Global Economic Prospects report. The publication forecasted a deceleration in global economic growth to 2.3% for the year 2025, primarily driven by rising trade tensions. Despite this broader global slowdown, the report projected India's GDP growth at 6.3% for FY26, affirming its position as the fastest-growing major economy in the South Asian region.

Why It Matters

This report is critical for India as it validates the country's macroeconomic resilience and strong domestic demand amid a global economic deceleration. Maintaining the status of the fastest-growing major economy helps attract foreign direct investment and boosts market sentiment by highlighting India's stability compared to other Emerging Market and Developing Economies (EMDEs).

Background

History & Context

The World Bank Group, established during the 1944 Bretton Woods Conference, is a premier international financial institution aimed at reducing poverty and fostering sustainable development. It publishes the Global Economic Prospects (GEP) report semi-annually, typically in January and June, to provide in-depth analysis of global economic developments and forecasts. Historically, the GEP has served as a vital benchmark for global policymakers, focusing specifically on the performance, vulnerabilities, and prospects of Emerging Market and Developing Economies (EMDEs).

What Changed

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Global Growth Trajectory: BEFORE global economic forecasts held slight optimism for mid-2020s stabilization, NOW global growth is projected to decelerate sharply to 2.3% in 2025 due to mounting trade tensions and geopolitical fragmentation.
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India's Growth Outlook: BEFORE India's GDP growth in preceding fiscal years (like FY24) surged past 7% driven by aggressive post-pandemic recovery, NOW growth is projected to moderate and stabilize at a sustainable 6.3% for FY26.
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Trade and Global Value Chains (GVCs): BEFORE Emerging Market and Developing Economies benefited from highly integrated and expanding global value chains, NOW these chains are facing friction due to trade barriers, leading to tighter trade conditions for EMDEs.

Prelims Angle

NCERT Connection

This event directly connects to Class 12 Macroeconomics Chapter 2 — National Income Accounting. The World Bank's projections utilize key national income aggregates, primarily Gross Domestic Product (GDP), to measure and compare the economic health of different nations. It demonstrates how theoretical GDP concepts are practically applied to assess global value chains and predict the economic trajectory of emerging markets.

Practice Questions

Q1

Correct Statement(s)

With reference to the World Bank's Global Economic Prospects report of June 2025, consider the following statements: 1. The report forecasted an acceleration in global growth for 2025 due to easing trade tensions. 2. It projected India to remain the fastest-growing major economy in the South Asian region with a 6.3% GDP growth for FY26. Which of the statements given above is/are correct?

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