IMF Raises India Growth to 6.5% Despite West Asia Conflict—Here's Why

The International Monetary Fund (IMF) on Tuesday revised India’s economic growth forecast for 2026–27 upwards to 6.5%, from its January estimate of 6.4%, citing easing US tariffs and strong domestic momentum.

In its latest World Economic Outlook, the IMF said the benefits of a reduction in additional US tariffs on Indian goods, from 50% to 10, outweighed the impact of geopolitical tensions arising from the ongoing West Asia conflict.

The upgrade also reflects carryover effects from stronger-than-expected growth in 2025–26, when the IMF raised its estimate by 0.3 percentage points from January and by one percentage point from October to 7.6%, in line with India’s official advance estimates.

This comes against the backdrop of the Economic Survey’s projection of 6.8–7.2% growth for the current fiscal year. However, it was estimated even before the war.

Inflation Pressures Rise

Global headline inflation is expected to increase to 4.4% in 2026 before easing to 3.7% in 2027, with both figures revised upwards.

In India, inflation is expected to move closer to the central bank’s target after easing in 2025 due to lower food prices.

Risks from Energy and Geopolitics

The IMF warned that prolonged disruption in West Asia could push global growth down to 2.5% in 2026, while raising inflation to 5.4%.

A joint statement by the IMF, World Bank and International Energy Agency said shipping through the Strait of Hormuz has yet to fully normalise, and supply disruptions could keep fuel and fertiliser prices elevated.

The IMF cautioned that escalating geopolitical tensions could trigger a broader energy crisis, while also flagging risks from trade disputes, supply chain disruptions — particularly in rare earths — and potential corrections in financial markets linked to artificial intelligence-related expectations.

Global Growth Outlook Weakens

The IMF expects the global economy to grow by 3.1% in 2026, 0.2 percentage points lower than its January forecast, assuming the West Asia conflict remains limited and disruptions ease by mid-2026.

Growth is projected at 3.2% in 2027, unchanged from earlier estimates, but below the historical average of 3.7% seen between 2000 and 2019.

The downgrade comes amid rising geopolitical tensions, including a US naval blockade of the Strait of Hormuz, which has raised concerns over energy supplies and shipping disruptions.