IMF revises India’s growth forecast for FY25 & FY26; here’s what changed in World Economic Outlook

The International Monetary Fund (IMF) has revised up its growth projections for India, citing a more favourable external environment, even as global economic expansion is expected to slow from its 2024 pace.

The IMF said that the upward revision reflects a "more benign external environment than assumed in the April reference forecast."

“The 6.4% growth rates for this year and next are slight upgrades compared to what we had in April - 0.2 percentage points in 2025 and 0.1 percentage point in 2026,” IMF Research Department Division Chief Deniz Igan said at a press briefing.

In a footnote, the IMF said that for India, data and projections are presented on a fiscal year (FY) basis.

India's growth projections are 6.7% for 2025 and 6.4% for 2026, based on the calendar year.

Igan said that the driver of this relatively stable growth for India “is the fact that there has been a reform momentum supporting robust consumption growth and a push for public investment.”

While the IMF raised its global growth forecast to 3%, it still sees growth slowing this year, down from 3.3% in 2024 and well below the pre-pandemic average of 3.7%.

The modest upgrade from April’s forecast (2.8%) is attributed largely to front-loaded international trade activity, lower-than-expected tariff rates, and improved financial conditions.

However, the IMF warned that the benefits from trade front-loading, especially visible in the first half of 2025, will likely unwind, dragging on 2026 growth, though offset by other global developments.

Growth in advanced economies is projected to be 1.5% in 2025 and 1.6% in 2026.

The United States is forecast to expand by 1.9% in 2025 and 2.0% in 2026, up 0.1 and 0.3 percentage points, respectively, from April’s projections.

The revisions reflect lower-than-anticipated tariff levels, looser financial conditions, and fiscal stimulus from the recently passed One Big Beautiful Bill Act (OBBBA). The IMF estimates the OBBBA could raise US output by 0.5% through 2030.

The IMF said that in emerging market and developing economies, growth is expected to be 4.1% in 2025 and 4.0% in 2026.

China’s 2025 growth was revised up sharply to 4.8%, 0.8 percentage point higher than April’s estimate, following stronger-than-expected first-half performance and tariff reductions in its trade with the United States.