The International Monetary Fund (IMF) has projected a robust growth rate of 6.6% for India in the fiscal year 2025-26, solidifying its position as one of the fastest-growing emerging market and developing economies. This forecast, detailed in the IMF's latest World Economic Outlook report, comes despite challenges posed by increased United States (US) tariffs on Indian exports.

The IMF's projection reflects India's strong domestic demand and resilient growth fundamentals, which continue to underpin its economic momentum. This is further supported by a robust performance in the first quarter of FY26, which helped offset the impact of the US tariffs. India's GDP grew 7.8% year-over-year in the April to June quarter of fiscal year 2025-26.

While the IMF is optimistic about India's growth in 2025-26, it has slightly lowered its forecast for 2026-27 to 6.2%, anticipating a moderation in growth as the effects of early momentum ease. This projection also considers the potential impact of prolonged US tariffs on Indian exports, which could act as a drag on GDP performance. The US has imposed tariffs on India, including for its purchases of Russian energy. These tariffs are as high as 50%.

To mitigate the impact of these tariffs, the Indian government has implemented reforms to the Goods and Services Tax (GST). These reforms, including the simplification of tax slabs and reduction of rates on various consumption goods, are expected to boost domestic consumption and offset the negative effects of the tariffs.

The GST Council has cut rates on essential goods to stimulate consumer spending, potentially countering the effects of US tariffs. Experts predict these reforms may enhance GDP growth.

The IMF has also noted that India's ambition to become an advanced economy can be supported by comprehensive structural reforms that enable higher potential growth. These reforms could boost exports, private investment, and employment.

However, the IMF also cautions that there are significant near-term risks to India's economic outlook. Increased geoeconomic fragmentation could lead to tighter financial conditions, higher input costs, and lower trade, FDI, and economic growth.

Despite these challenges, the IMF remains confident in India's economic outlook, citing favorable domestic conditions and firm demand. Headline inflation is expected to remain contained, supporting stable prices.

Other organizations have also weighed in on India's economic prospects. The Asian Development Bank (ADB) has forecast India's GDP to grow by 6.5% in both fiscal years 2025 and 2026. Deloitte projects baseline economic growth of 6.7% to 6.9% this fiscal year and 6.5% to 6.9% the following fiscal, supported by direct income tax exemptions, continued goods and services tax (GST) reforms, an accommodative monetary policy, and a possible trade deal with the United States. Morgan Stanley has revised upwards its forecast for India's GDP growth in 2025-26 to 6.7%, citing strong April-June quarter numbers and expectations that upcoming cuts in Goods and Services Tax (GST) will boost domestic demand.