IMF raises India's 2026 growth forecast to 7%, flags uneven global outlook

The International Monetary Fund (IMF) on Tuesday raised its growth forecast for India to 7% for 2026, citing stronger-than-expected economic momentum, resilient domestic demand and robust services activity.

In its October 2026 World Economic Outlook, the IMF said India remained among the fastest-growing major economies, with activity holding up despite higher oil prices and global economic uncertainty.

The latest projection reflects stronger-than-expected momentum in the Indian economy, supported by domestic demand and the services sector, the report said.

The IMF, however, cautioned that the global economy was facing diverging growth prospects as geopolitical tensions, the war in the Middle East and trade-related uncertainties interacted with an investment boom driven by artificial intelligence (AI).

The Washington-based multilateral lender projected global economic growth at 3.1% in 2026 and 3.4% in 2027.

Global growth for 2026 was unchanged from its April forecast, while the projection for 2027 was revised moderately upwards.

Global headline inflation is projected to rise to 4.7% in 2026, primarily due to higher energy and food prices, before easing to 4.1% in 2027.

The IMF said the global economy had shown resilience in the face of repeated shocks, aided by flexible energy supplies, inventory drawdowns, adjustments by businesses and strong investment in AI-related technologies.

“However, this resilience is under strain. Without shoring up supply capacity and replenishing policy buffers, the global economy could soon test the limits of resilience,” the report said.

A prolonged conflict in the Middle East or further escalation could keep energy and food prices elevated, revive inflationary pressures and weigh on economic activity. Renewed trade tensions, extreme weather events and cyberattacks also pose risks to the outlook.

The report said the impact of these developments would vary across economies, depending on their exposure to energy price shocks and their ability to benefit from the global technology investment cycle.

Energy-importing economies with limited links to technology supply chains face a more difficult outlook because of higher import bills, exchange-rate pressures and weaker real incomes. On the other hand, economies benefiting from technology-related exports and investment are better placed to withstand the shocks.

The IMF also warned that a reassessment of profitability and productivity gains from AI could trigger a sharp decline in investment, equity market corrections and tighter financial conditions, with spillovers to economies integrated into technology supply chains.

It said risks to the global outlook remained tilted to the downside, even as stronger-than-expected AI investment and faster productivity gains could provide an upside to growth.

The report, titled 'Resilience Under Strain, Urgent Choices', said the global economy was proving resilient but unevenly so, with diminishing room to absorb further shocks.