- India's economic growth forecast for FY 2025-26 was raised to 7.3% by the IMF
- India's growth is expected to moderate to 6.4% in FY 2027 and FY 2028
- Global economic growth projected at 3.3% for 2025 and 2026 by the IMF
The International Monetary Fund raised India's economic growth forecast for fiscal year 2025-26 to 7.3%, as compared to 6.6% that was projected in October. This seems to indicate a more positive outcome anticipated by the global monetary organisation.
As per the IMF's World Economic Outlook report, India's growth is expected to moderate to 6.4% in the FY27 and FY28, owing to the fading effects of cyclical and temporary conditions.
India's inflation is projected to near target levels after a marked decline on the back of subdued food prices, the IMF said.
The IMF also revised its outlook for global economic growth to 3.3% in the calendar year 2025 and 2026 from its October forecast of 3.2% and 3.1% respectively. Similarly, for calendar year 2027, the agency foresees a projection of 3.2% growth.
The IMF credited this global growth projection due to an equilibrium between the challenges posed by unstable trade policies and the favourable conditions owing to a boom investments in AI and technology in North America and Asia. The outlook was also updated in light of fiscal and monetary measures expected to support growth, as well as the adaptility displayed by the private sector in adjusting to these shifts, it said.
Global headline inflation is projected to reduce to 3.8% from 4.1% in 2025 to 3.8% in 2026 and 3.4% in 2027, indicating lower energy costs and slackening demand. The IMF's inflation projections are broadly unchanged from its forecast in October.
The IMF also warned against the rising trend of chasing the AI boom with rapid and circular investments from tech giants and investors alike as a reassesment of the value of productivity growth that AI technology may provide, as well as the current uncertainty caused by trade tensions may disrupt the global economy.
"Re-evaluation of productivity growth expectations about AI could lead to a decline in investment and trigger an abrupt financial market correction, spreading from AI-linked companies to other segments and eroding household wealth. Trade tensions could flare up, prolonging uncertainty and weighing more heavily on activity," the IMF said.
"Domestic political tensions or geopolitical tensions could erupt, introducing new layers of uncertainty and disrupting the global economy through their impact on financial markets, supply chains, and commodity prices," it added.
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