IMF raises India’s FY27 growth forecast to 7%

International Monetary Fund has increased its growth forecast for India to 7% for 2026 (AI generated image)

In its latest World Economic Outlook (WEO), the IMF also upgraded India’s FY28 growth projection to 7% compared with the previous estimate of 6.7%.

India’s outlook stands out against a broader trend of downward revisions for economies directly affected by the conflict in the Middle East, as well as energy-importing emerging markets and developing economies elsewhere, according to the IMF.

It said that India’s sustained economic momentum and stronger growth potential are supported by favourable demographic trends, a large and expanding domestic market, and continued structural reforms.

India’s gross domestic product (GDP) growth stood at 7.8% in FY26.

The revision follows similar upgrades by other major institutions.

Last week, the World Bank raised its FY27 growth forecast for India to 7.1% from 6.6%, supported by robust domestic demand and strong exports despite global headwinds.

The Reserve Bank of India (RBI) also increased its FY27 GDP growth projection to 7.1% from 6.7% earlier.

The IMF said India’s trade agreements with the United Kingdom and European Union could boost growth by lowering trade barriers, easing policy shifts and strengthening supply chains. Broader access to services, foreign investment and international taxation could further amplify the gains, it noted.

India’s GDP expanded by 7.8% in the April-June quarter, exceeding expectations.

On a calendar year basis, the IMF projects India’s economy to grow by 7.4% in 2026 and 7% in 2027. “India’s growth remained robust, underpinned by domestic demand and services, despite higher oil prices,” it said.

The IMF also revised its global growth outlook upward by one percentage point to 3.1% for 2026, while keeping its projection for 2027 unchanged at 3.4%.

Meanwhile, China’s economic growth forecast for 2026 was lowered by 0.1 percentage points to 4.5%.

The IMF warned that persistent conflicts, cyber threats and extreme weather events remain significant downside risks to the global economic outlook.

“As geopolitics and technology reshape the global economy, how well prepared each country is to adapt to the changes will determine its medium-term potential,” it said, adding that readiness to adopt AI and to reliably meet energy needs will be crucial.

On inflation, the IMF projected India’s retail inflation at 5% in FY27, easing to 4.4% in FY28. However, the latest data showed that annual retail inflation rose to 5.54% in September from 4.8% in August.