IMF Sees India's GDP Growth Trimmed To 6.2% In FY27 If High US Tariffs Stay
For FY26, IMF has reiterated its projection of 6.6% GDP growth.
The International Monetary Fund sees India's gross domestic product growth in fiscal year 2027 trimmed to 6.2%, if the high US tariffs stay, according to the global financial body's 2025 Article IV Consultation report released on Wednesday.
The projection of 6.2% growth in FY27 is lower than the 6.6% growth which the IMF has projected for India in FY26.
The US tariffs on Indian exports, which are as high as 50%, are seen as a notable drag on India's FY27 GDP performance, according to the IMF. However, New Delhi and Washington are currently locked in talks for a trade deal, which could end up significantly reducing the levies.
According to the IMF report, India's recent adjustment in goods and services tax (GST) rates is expected to offset the impact of tariffs on the GDP. In September, the GST regime was overhauled, which led to the tax slabs being cut to 5% and 18%, and the two other slabs — 12% and 28% — being removed. This led to a reduction in the tax rates on an array of consumption goods.
The IMF report suggests that India's ambitious goal of achieving "advanced economy" status can be significantly aided by decisive structural reforms. This domestic momentum is key to maintaining stability against an increasingly fragmented geoeconomic environment.
Also, it pointed that increased number of new trade pacts globally is expected to boost exports and private investments, along with generating more employment in the country,
Despite this, the IMF report flags that there are significant near-term risks that are present for India's economic outlook. More geoeconomical fragmentation is expected to cause a tighter financial condition for India, it said.
The report goes on to add that India needs decisive fiscal glide path in the medium term to rebuild buffers. It also stated that unpredictable weather shocks can reignite price pressures in the economy.
On the monetary front, the report suggests that the Reserve Bank of India’s policy stance should remain nimble and data-driven, retaining an easing bias to support growth as inflation risks subside. Maintaining greater exchange rate flexibility is also recommended as a crucial mechanism to help India absorb external economic shocks effectively.
Sharing other key forecasts, the IMF report said India's general government debt is seen declining to 77% of the GDP in FY31. If US tariffs persist, India must shift to neutral fiscal stance in FY27, it added.
Inflation, it said, is expected to remain benign in India, and converge to the central bank's target of 4% in FY27. The average inflation in FY26 is seen at 2.8%, it added.
