The International Monetary Fund (IMF) has marginally lowered India's economic growth forecast for fiscal year 2026-27 to 6.4%, compared with the 6.5% projection made in April, citing the impact of elevated global energy prices.
Despite the revision, IMF said India will continue to be one of the world's fastest-growing major economies, supported by strong domestic demand and a resilient services sector.
In its World Economic Outlook July 2026 Update, the IMF also raised India's growth estimate for FY28 to 6.7%, up from the earlier projection of 6.5%, signalling confidence in a recovery once the effects of higher energy prices begin to fade.
1 June 2026
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"India remains among the fastest growing major economies, with growth projected at 6.4% supported by strong momentum in private consumption and services activity," the IMF said.
Higher Oil Prices Weigh On Near-Term Outlook
Explaining the revisions, Deniz Igan, Division Chief (World Economic Studies) at the IMF, said stronger-than-expected economic data and resilient high-frequency indicators had initially supported the outlook for India. However, the benefits were outweighed by rising energy costs.
"Factors that are underpinning the forecast revisions are basically twofold. On the upside, we have the better-than-expected out turn in the most recent data, but we also have high-frequency indicators through April showing quite a bit of resilience in overall economic activity," Igan told reporters, as per news agency PTI.
"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.
Looking ahead in 2027, Igan said the IMF expects a strengthening of the economy with the energy shock dissipating and medium-term growth being estimated at around 6.5%.
India Outpaces China and Most Global Economies
According to IMF projections, India's estimated 6.4% growth for FY27 remains well ahead of most major economies.
China is expected to grow by 4.6% in 2026, while the United States is forecast to expand by 2.3%. Euro area is projected to grow by 0.9%, the United Kingdom by 1%, Japan by 0.6%, and Canada by 1.1%.
Among Asian peers, Vietnam is expected to record 7.5% growth, supported by technology exports and robust domestic demand, while Malaysia is projected to grow by 4.7% and Thailand by 1.9%.
South Korea's economy is forecast to expand by 2.6%, benefiting from strong demand for semiconductors and AI-related hardware.
Global Growth Affected By War and AI
Globally, the IMF retained its growth forecasts of 3% for 2026 and 3.4% for 2027, broadly unchanged from its April outlook on a cumulative basis.
The Fund said the world economy continues to face opposing forces, with the conflict in West Asia weighing on activity while rapid advances in artificial intelligence (AI) and the global technology cycle provide a counterbalance.
According to the IMF, the modest slowdown reflects the effects of the war being partly offset by stronger technology-led demand.
However, it cautioned that risks remain tilted to the downside, including the possibility of renewed geopolitical tensions, volatile commodity prices, supply chain disruptions, trade fragmentation and financial market uncertainty.
At the same time, faster normalisation in energy markets, stronger AI investment and structural reforms could provide support to global growth over the medium term.
