IMF Ups India’s FY26 Growth Forecast to 6.6%, Trims FY27 Estimate by 20 Basis Points

The International Monetary Fund (IMF) has raised India’s growth projection to 6.6% for the financial year ending April, citing strong domestic demand boosting growth momentum. The IMF projected growth of 6.4% in its July forecast update.

The IMF cited the resilience of the Indian economy as offsetting the impact of the aggressive US reciprocal tariffs on Indian goods.

However, the IMF has lowered its growth projection for the next fiscal year, FY27, by 20 basis points to 6.2%, taking into account the likely slowing of the Indian economy from the ongoing trade and tariff worries.

Strong Domestic Demand Drives India’s FY26 Growth Outlook

IMF’s upwardly revised growth projection for India comes a week after the World Bank raised its forecast to 6.5%, citing similar factors. The IMF also joined a number of credit rating agencies, including S&P Global, Moody’s, and Fitch Ratings, who have raised the growth forecast for India.

“In India, growth is projected to be 6.6% in 2025 and 6.2% in 2026. Compared with the July World Economic Outlook Update, this is an upward revision for 2025, with carryover from a strong first quarter more than offsetting the increase in the US effective rate on imports from India since July, and a downward revision for 2026,” the IMF said in its October World Economic Outlook update.

The IMF uses calendar years in its projections, while India follows an April–March fiscal calendar. For consistency, IMF’s 2025 projection aligns with India’s FY26.

India’s gross domestic product (GDP) grew at an unexpectedly high rate of 7.8% in April–June, driven by strong private consumption. The reduction in the Goods and Services Tax (GST) rates, which came into effect on September 22, is further expected to stir domestic demand in the upcoming quarters, according to analysts.

Emerging Market Economies and Inflation in Focus

As per the IMF report, inflation for several emerging market economies, especially Asian economies, has been revised downward in comparison to the economic outlook projected for the corresponding period a year ago. This largely indicates lower-than-expected outturns, with food, energy, and administrative prices playing a significant role, including in countries like India.

The headline inflation print, measured by the Consumer Price Index, for September fell to an eight-year low of 1.54% due to a decline in vegetable prices.

Global headline inflation is projected to decline to 4.2% in 2025 and further ease to 3.7% in 2026, the report said. Inflation forecasts have been revised upward in a few developed economies, including the United Kingdom and the US.

“In the United States, inflation is expected to pick up beginning in the second half of 2025, as the impact of tariffs is no longer absorbed within supply chains and instead passed on to consumers,” the report said.