The International Monetary Fund (IMF) has revised India's economic growth forecast for the fiscal year 2025-26 (FY26) upwards to 7.3%. This represents a 0.7 percentage point increase from the IMF's previous projection in October. The upward revision reflects India's strong economic performance in recent quarters.
The IMF's latest World Economic Outlook (WEO) update, released on Monday, also revised India's growth forecast for FY27 to 6.4%, a slight increase from the earlier estimate of 6.2%. While the IMF anticipates a moderation in growth in the following years, India is expected to remain the fastest-growing economy among major nations.
The IMF attributes the revised growth projection to the better-than-expected economic results in the third quarter and strong momentum in the fourth quarter. Official data from the Ministry of Statistics and Programme Implementation (MoSPI) indicates that India's GDP grew by 8% during April-September of FY26, supported by an 8.2% expansion in the July-September quarter. The Ministry's First Advance Estimates project the Indian economy to grow by 7.4% in the current fiscal year. The growth rate for FY25 was recorded at 6.5%.
The IMF expects growth to moderate to 6.4% in FY27 and FY28 as cyclical and temporary factors subside. Despite this expected cooling, India's growth story remains bright within a global landscape facing trade frictions and uncertainties. The IMF projects global growth at 3.3% in 2026 and 3.2% in 2027.
Regarding inflation, the IMF anticipates that price pressures will ease further, driven by lower food prices. Inflation is projected to return close to the Reserve Bank of India's (RBI) target levels following a decline in 2025. The RBI aims to maintain consumer price index (CPI) based inflation at 4%, with a tolerance band of 2 percentage points on either side. Lower oil costs may also contribute to easing inflationary pressures.
The IMF's updated forecast underscores India's robust economic momentum and its position as a leading growth engine in the global economy. However, the expected moderation in growth in the coming years suggests that markets may favor companies that can sustain performance even as demand normalizes.
