The International Monetary Fund (IMF) Tuesday raised India’s economic growth forecast to 6.4 per cent for both FY26 and FY27, citing a more favourable external environment than anticipated in the April outlook.
The earlier projections stood at 6.2 per cent for FY26 and 6.3 per cent for FY27.
Based on the IMF projections, India is expected to record the highest growth rate among advanced economies and emerging markets and developing ones over the current and next fiscal year.
“In India, growth is projected to be 6.4 per cent in 2025 and 2026, with both numbers revised slightly upward, reflecting a more benign external environment than assumed in the April reference forecast,” the IMF said in its latest World Economic Outlook.
Below RBI’s estimate
However, the IMF projections are slightly below the Reserve Bank of India’s estimate of 6.5 per cent for FY26. According to the National Statistical Office, India’s gross domestic product (GDP) grew 6.5 per cent in FY25.
On a calendar year basis, the IMF anticipates India’s economy to grow 6.7 per cent in 2025 and 6.4 per cent in 2026.
The IMF raised global growth outlook as well, projecting 3 per cent growth in 2025, up from 2.8 per cent, and 3.1 per cent in 2026 compared to April forecast of 3 per cent.
“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,” the IMF said.
The IMF highlighted recent US trade policy developments as influential. President Donald Trump’s April 2 announcement of reciprocal tariffs, including a 26 per cent duty on India, was followed by a 90-day pause until July 9, later extended to August 1.
“Pause in higher tariffs for most of its trading partners and a de-escalation of trade tensions with China in May modestly reduced the US effective tariff rate from 24 per cent to about 17 per cent,” said Pierre-Olivier Gourinchas, chief economist at IMF. “This modest decline in trade tensions, however fragile, has contributed to the resilience of the global economy so far.”
Uncertainty prevails
However, global policy remains highly uncertain, with only a few countries having reached fully-fleshed out trade agreements with the US, he added.
The US growth forecast has been revised upward to 1.9 per cent for 2025, driven by lower tariffs than those announced on April 2 and looser financial conditions, with some offset from a faster-than-anticipated slowdown in private demand and weaker immigration, the IMF mentioned.
Growth is expected to rise slightly to 2 per cent in 2026, supported by a boost from the One Big Beautiful Bill Act (OBBBA), which is expected to stimulate corporate investment through tax incentives. “The IMF staff estimates that the OBBBA could raise US output by about 0.5 per cent on average over the WEO horizon through 2030, relative to a baseline without this fiscal package,” added the IMF.
China’s economic growth forecast has also been upgraded to 4.8 per cent for 2025, due to stronger-than-expected performance in the first half of 2025 and significant reduction in US-China tariffs, according to the IMF. Growth in 2026 is expected at 4.2 per cent, driven by lower effective tariff rates.
