IMF lifts India’s growth forecast, warns of global slowdown
India will remain one of the fastest-growing major economies in the world through 2025–26, with a projected growth rate of 6.6%, according to the International Monetary Fund’s (IMF) latest World Economic Outlook (WEO) report released this week.
The IMF said India’s strong first-quarter performance has more than offset the impact of increased US tariffs on Indian exports, prompting an upward revision from earlier forecasts.
In comparison, China’s growth for the same period is expected to slow to 4.8%, reaffirming India’s lead among large emerging market and developing economies.
Growth Momentum Carries Forward Despite Trade Pressures
The report noted that the Indian economy grew 7.8% in the first quarter of FY26, driven by robust domestic demand and public investment.
“The upward revision is largely due to carryover effects from India’s strong start to the fiscal year, rather than any offsetting effect from recent US tariffs,” the IMF said.
However, the Fund trimmed its 2026 forecast to 6.2%, warning that the early momentum may fade as global trade tensions persist.
Global Growth to Remain Below Pre-Tariff Levels
The IMF expects global growth to reach 3.2% in 2025 before easing slightly to 3.1% in 2026, as the economic effects of higher tariffs and policy uncertainty linger.
Inflation, the report added, will continue to decline unevenly across regions, remaining above target in the United States while staying subdued in several advanced economies.
Advanced economies are projected to grow by 1.6% on average, while emerging and developing markets are expected to expand by 4.2% in 2025.
Among advanced economies, Spain is expected to lead with 2.9% growth, followed by the United States at 1.9%, Canada at 1.2%, and Japan at 1.1%.
IMF Warns of Rising Global Risks
The Fund cautioned that “prolonged uncertainty, protectionist measures, and labour market disruptions” could weigh on growth prospects. It also cited “fiscal vulnerabilities and potential financial market corrections” as key downside risks.
“Fiscal buffers should be rebuilt. Central bank independence must be preserved, and structural reforms should be redoubled,” the IMF advised policymakers.
India’s Domestic Outlook Remains Robust
India’s government has maintained its GDP growth forecast at 6.3–6.8% for 2025–26, citing strong domestic consumption and resilience in manufacturing and services.
The IMF’s upward revision aligns with this view, reinforcing India’s position as a key driver of global economic growth amid geopolitical and trade headwinds.
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