IMF lifts India’s FY26 growth forecast to 6.4% on stronger external environment, policy support

The revision came as part of the Fund’s July update to its World Economic Outlook (WEO), which provides a mid-year reassessment of global growth trajectories.

For FY27 as well, India’s growth projection was revised slightly upward to 6.4%, compared with 6.3% in the April forecast.

The IMF attributed these upgrades to India’s ongoing economic resilience and a more favourable global environment.

“In India, growth is projected to be 6.4% in 2025–26 (FY26) and 2026–27 (FY27), with both numbers revised slightly upward, reflecting a more benign external environment than assumed in the April reference forecast,” the IMF said.

In comparison, global economic growth is expected to remain modest—expanding by 3% in calendar year 2025 and 3.1% in 2026.

These are upward revisions of 0.2 and 0.1 percentage points, respectively, from the Fund’s April outlook.

India’s economy had slowed to 7.4% growth in the March quarter of FY25, pulling down the full-year growth rate to 6.5%, according to government data released on May 30.

The IMF’s latest forecast aligns with estimates from other institutions. Moody’s Ratings expects India to grow above 6.5% in FY26, driven by strong domestic demand, capital spending, and continued fiscal and monetary support.

S&P Global also raised its FY26 estimate to 6.5%, citing policy continuity, a favourable monsoon, and steady private consumption.

The Asian Development Bank (ADB), however, revised its projection downward from 6.7% to 6.5%, citing trade risks and higher U.S. tariffs as key concerns.

Despite external headwinds, India remains one of the fastest-growing major economies, supported by stable macroeconomic indicators, a robust policy framework, and healthy fundamentals.

The IMF also pointed to a marginal improvement in global growth prospects, helped by easing financial conditions and fiscal expansion in several advanced economies.

“This reflects stronger-than-expected front-loading in anticipation of higher tariffs; lower average effective US tariff rates than announced in April; an improvement in financial conditions, including due to a weaker US dollar; and fiscal expansion in some major jurisdictions,” it said.

Global headline inflation is projected to decline to 4.2% in 2025 and further to 3.6% in 2026. However, the IMF warned that price pressures will likely persist above target in the US, even as inflation moderates more rapidly elsewhere.