Days before Nirmala Sitharaman presents Union Budget 2025, International Monetary Funds’ Managing Director Kristalina Georgieva has expressed concerns over the “weak” Indian economy.

The Finance Minister is expected to make bold decisions and carry out big-ticket reforms at a time when the Indian economy is experiencing a sluggish phase, which is attracting widespread criticism and dismay.

Days before the IMF’s observation, the National Statistical Office, in its First Advanced Estimates, projected the 2024-25 GDP growth rate of 6.4%, much below the 8.2% growth recorded in 2023-24.

IMF Expresses Concerns

The government-controlled SBI projected a growth rate of 6.3% for the abovesaid period.

Before Nirmala Sitharaman could present her eighth Union Budget, the IMF chief expressed her concern that the Indian economy may be a little weaker in 2025.

Without explaining further, she said, “Low-income countries, despite all the efforts they are making, are in a position when any new shock can affect them quite negatively.”

Kristalina Georgeiva did not name India, China or any other country, she said that the economic uncertainty is particularly high around the path for trade policy going forward, which may add to the headwinds facing the global economy.

Donald Trump’s Policies May Hit Indian Exports

The IMF MD said that the uncertainties are due to the higher interest rates for long-term loans, though the bank rates for short-term loans have come down.

Kristalina Georgieva’s comment has come also days before Donald Trump takes oath as the US President. Earlier on many occassions he warned India, China, Mexico and Canada of increased tariffs so that the domestic firms become more competitive and the US economy is boosted under his controversial “America First” policy.

Experts believe the main challenge thrown to the pragmatic Finance Minister is that the manufactring and supply lines are robust, while the consumption is sluggish.

Rupee Hits Record Low Against US Dollar

As Nirmala Sitharaman must be busy making budget when this article is being written, she must be concerned with continuously falling rupee against US dollar.

When the exports are not picking up and the Indian currency is facing deep depreciation against the greenbach, the US treat is looming lare on Indian economy.

The Reserve Bank of India is most likely to slash the repo rate when the Monetary Policy Committee meets on January 28-29 ad the banks may be ready to offer loans on reduced rates.

The repo rate is the rate at which the RBI extends loan to commercial banks.

But the manufacturing sector may not be that much receptive and they may not rush to the banks because of sluggish demand and increasing inflation, that make their input cost increasingly higher.

SBI Report

The SBI Mutual Fund has said in its report that amid slow demand,the policy support may boost the consumption and thus Indian economy may register a growth rate of 7%, much more than the projection of 6.3%.

Will Nirmala Sitharaman take decisions that may increase consumption and thus demand, giving a much-required push to the economy?

Here “policy support” means the allocation of funds to support the existing schemes or launch new schemes by giving financial assitance or incentives to chosen sector to bring out desired results.

Will Nirmala Sitharaman Launch Pro-People Schemes?

The Confederation of Indian Industries or CII in its pre-Budget meeting with the Finance Minister and her team emphasised to cut income tax rates or at least increase standard deduction so that more money is left with the salaried class that makes the majority of the middle class.

It also suggested Nirmala Sitharaman to increase the minimun wages as well as the Budget allocation for the Mahatma Gandhi National Rural Eemployment Gurantee Act or the MNREGA.

The budget provision for this scheme was Rs 86,000 crore in Union Budget 2024-25, about 14% less than Rs 1,05,000 crore, allocated in Budget 2023-24.

The CII has argued that the additional money in the pocket of the villagers would increase consumption, improve the rural economy and push the demand and Indian economy forward.

However, the IMF chief should also know that Indian government has decided to keep the fiscal deficit to 4.5% for the FY 2025-26. It was limited to 4.9% for the FY 2024-25.

Earlier, the IMF had slashed the GDP growth rate projection for India for FY 2024-25 from 7% to 6.7%. However, the NSO in its first estimates has projected 6.3%.

Analysts believe the Indian economy is robust, they hope it will pick up pace soon. However, the hands of the Finance Minister are tied.