IMF raises India’s FY26 growth forecast to 6.6%, FY27 outlook trimmed to 6.2%

The International Monetary Fund (IMF) on Tuesday raised India’s economic growth projection for FY26 to 6.6% from 6.4% estimated earlier, citing a strong carryover from robust first-quarter activity that more than offset the impact of higher US tariffs on Indian imports.

"Compared with the July WEO Update, this is an upward revision for 2025, with carryover from a strong first quarter more than offsetting the increase in the US effective tariff rate on imports from India since July, and a downward revision for 2026," the IMF said in its latest World Economic Outlook (WEO).

The agency, however, lowered the growth forecast for FY 2026-27 by 20 basis points to 6.2%.

“Compared with the pre-tariff forecast in October 2024, India’s growth is projected to be cumulatively 0.2 percentage point lower,” the report said.

The Indian economy grew by 7.8% in April-June, the highest in five quarters, before the disruptive US tariffs were imposed.

Earlier this month, the World Bank also raised India's growth forecast for the current fiscal to 6.5% from 6.3% estimated earlier, saying the country is expected to remain the fastest-growing major economy.

Fiscal assumptions and data differences

The IMF said its projections for India are based on “available information on the authorities’ fiscal plans,” adjusted for staff assumptions. It also highlighted differences in fiscal accounting between the IMF and Indian presentations, particularly on disinvestment proceeds, license auctions, and certain public-sector lending activities.

The Fund added that it has aligned its expenditure treatment to include off-budget food subsidy components from FY2020-21 onward, in line with the Indian government’s revised budget presentation.

Global economy slowing amid trade uncertainty

The IMF’s latest outlook pointed to a moderate global slowdown, with world growth expected to decline from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026. The global growth forecast remains cumulatively 0.2 percentage point below the pre-tariff projections made in October 2024, as increased protectionism, trade fragmentation, and fiscal vulnerabilities weigh on the outlook.

Emerging markets and developing economies, meanwhile, are seen moderating to just above 4% growth.

Risks tilted to downside

The IMF cautioned that global risks remain “tilted to the downside,” pointing to the potential for further escalation of protectionist measures, tighter financial conditions, and fiscal fragilities.

“Prolonged policy uncertainty could dampen consumption and investment,” the Fund said.

However, it also identified upside risks from possible trade normalisation, renewed reform momentum, and productivity gains linked to artificial intelligence and digitalisation.