IMF Raises India’s Growth Forecast Amid Brighter Global Outlook
The upward revision is attributed to a more benign external environment than anticipated in its April forecast.
The International Monetary Fund has raised its growth projections for India, reflecting improved global economic conditions. In its latest World Economic Outlook update released on Tuesday, the IMF revised India’s GDP growth forecast for both fiscal 2026 and financial year 2027 by 20 and 10 basis points, respectively, setting both at 6.4%.
The upward revision is attributed to a more benign external environment than anticipated in its April forecast.
Globally, the IMF has lifted growth estimates for 2025 and 2026 by 20 and 10 basis points to 3.% and 3.1%, respectively. The improved outlook stems from factors such as eased financial conditions, front-loading in trade ahead of anticipated tariff hikes, lower-than-expected US tariff rates, and expansionary fiscal policies in major economies.
Growth forecasts for the US have been raised to 1.9% for 2025 and 2% for 2026, while China’s growth is now expected to be 4.8% and 4.2% in the respective years. China outperformed expectations with 6% growth in early 2025, driven by robust exports, fiscal support, and a weaker yuan.
The eurozone showed mixed results, with strong investment-driven growth, though consumer spending lagged.
Despite recent gains, global trade remains clouded by lingering tariff uncertainty. The US has extended its pause on higher tariffs until August, but fresh threats of steeper levies beyond that date persist. Legal challenges around the US administration's use of emergency powers to impose tariffs add to the complexity.
Financial markets have responded positively to the shifting landscape. Equity markets, including in the US, have rebounded following April’s tariff shock, while the US dollar has weakened, granting monetary policy flexibility to emerging economies. However, concerns remain over long-term fiscal sustainability, particularly in the US, even after the passage of the “One Big Beautiful Bill Act.”
Global inflation is on a downward trajectory, with headline inflation expected to fall to 4.2% in 2025 and 3.6% in 2026. Yet disparities exist: US inflation is expected to remain above the 2% target due to tariff-related cost pressures, while Europe and China may see more subdued price rises.
Regionally, growth in the Middle East and Central Asia is projected at 3.4–3.5%, while sub-Saharan Africa is set to grow at around 4–4.3%. Latin America and emerging Europe are expected to experience slower but steady expansion.
