India to retain fastest-growing major economy tag in FY27; IMF pegs growth at 6.4%

The International Monetary Fund (IMF), in its July update to the World Economic Outlook (WEO), has said that the Indian economy is likely to grow at 6.4% in fiscal year 2026-27 (FY27), 10 basis points (bps) lower than its 6.5% growth projection in the April Outlook. It noted that higher energy prices may offset the resilience in the country's economic activity. It further projected India’s economy to grow at 6.7% in FY28, 20 basis points higher than the 6.5% growth projected in the April Outlook.

What did IMF say?

According to the IMF, India remains among the fastest-growing major economies, with growth projected at 6.4%, supported by strong momentum in private consumption and services activity. Deniz Igan, Division Chief (World Economic Studies) said, “Factors underpinning the forecast revisions are basically twofold. On the upside, we have the better-than-expected outturn in the most recent data, and we also have high-frequency indicators through April showing considerable resilience in overall economic activity.”

She said, but these positive effects are then more than offset for 2026 by the higher energy prices in the baseline and in the July update, as well as the greater pass-through of those higher oil prices to prices at the pump in India. She added, ‘Moving into 2027, the IMF expects a strengthening of the economy with the energy shock dissipating and medium-term growth being estimated at around 6.5%, and output closing we expect some pickup there’.

She added that these positive factors are more than offset in 2026 by higher energy prices in the baseline and the July update, as well as a greater pass-through of higher oil prices to fuel prices in India. She further said, “Moving into 2027, the IMF expects a strengthening of the economy as the energy shock dissipates, with medium-term growth estimated at around 6.5 % and the output gap closing, leading to some pickup in activity.”

IMF projected global growth at 3.0% in 2026 and 3.4% in 2027, down from the average growth of 3.5% recorded during 2024-25 and broadly unchanged on a cumulative basis compared with the forecasts made in April. The modest slowdown reflects the effects of the war in the Middle East, partly offset by accelerated demand-driven momentum in the global technology cycle, supported by advances in artificial intelligence (AI) and its adoption. The IMF noted that the impact varies significantly across countries, depending on their exposure to the conflict and their position in the technology value chain.

How do other economies fare?

The IMF upgraded China’s GDP growth rate from 4.4% in April to 4.6% for 2026 and 4.1% for 2027, making it the second-fastest-growing economy in the world. The United States of America holds the third position at a 2.3% growth rate for 2026 and 2.2% for 2027. Meanwhile, Euro Area growth is projected at 0.9% for 2026, a 0.2% cut from its April estimate due to vulnerabilities to energy shock.

The Middle East & Central Asia were downgraded drastically from 1.9% to 0.7% GDP growth rate for 2026. However, the IMF also expects a sharp V-shaped recovery in 2027, growing at 6.7% in the next year.