About a month ago, IMF managing director Kristina Georgieva, while addressing the Fund's annual meetings, emphasized that heightened uncertainty is likely to stay longer than expected.

In short, it has now become the new normal.

This index tracks the degree of uncertainty in the global economy by mining country reports filed by the Economist Intelligence Unit. Index readings are available for 143 countries. It is the index's subcomponents, though, that help explain this year's global spike.

The IMF's World Policy Uncertainty Index reached a level of 72,312.5 in October, against 25,719.7 recorded in January, an increase of over 180%. Another part, its World Trade Uncertainty Index, has risen from 6,678.7 to 45,519.3 over the same period, an upshoot of over 580% in nine months.

Meanwhile, counterintuitively, the IMF's World Sentiment Index is showing signs of renewed buoyancy, an indication of the global economy's show of resilience and a sense of relief that its slowdown is unlikely to be as severe as feared.

The IMF's October edition of the World Economic Outlook had upgraded its earlier forecasts and now predicts 2025 global growth at 3.2%, only a shade slower than the 2024 rate of 3.3%. The IMF attributes this bounce-back to US flexibility on trade deals, with some of them reworked and many US measures eased, apart from its trade partners opting to keep their trading systems open and private businesses showing agility in the face of policy uncertainty.

The IMF also finds that emerging and developing economies have strengthened their policy frameworks to achieve better resilience. Upbeat sentiment is also reflected in the current state of capital markets, with the S&P 500 index having risen without a break since April 2025. Some of the 'wealth effect' from this upswell in the market value of stocks has led to a positive loop of consumption and investment dynamics.

This effect could go into reverse, though, if a suspected 'AI bubble' in the US were to burst.

Much of the good news holds special significance for India. Our economy has been buffeted by various external factors—such as the covid pandemic, Russia-Ukraine war and global trade uncertainty caused by the US's unilateral executive actions on import tariffs. Despite these headwinds, it has continued to show a growth impetus, even if our expansion in output has been slower than we would like.

Recent fiscal measures like the GST reset are expected to add some fuel to the economy's growth engines. The strategy should now be to anchor these impulses in a way that grants the growth momentum durability beyond the near term. The government has made a variety of policy moves—it lowered corporate tax rates, brought down inflation and interest rates and also offered incentives for manufacturing.

However, these supply-side measures have seemed unable to move the needle much. With the limits of supply-side economics in sight, it might be time to shift focus towards demand-side policies. India must invest more in health and education, stimulate employment and end its stagnation in real wage rates.