The International Monetary Fund (IMF) has raised India’s economic growth forecast for the fiscal year 2025–26 to 7.3%. This is a significant upward revision from its earlier estimate of 6.6%. The rise reflects stronger-than-expected performance in recent quarters.
Revised Forecast Shows Resilience#
In its latest World Economic Outlook report, the IMF said that India’s growth momentum in the third and fourth quarters of the fiscal year was stronger than it had anticipated. “India is a key growth engine for the world,” said Julie Kozack, Director of the IMF’s Communications Department.
Last week, India’s National Statistical Office (NSO) also raised its GDP estimate for FY26 to around 7.4%, above the government’s earlier projection range of 6.3–6.8%.
Short-Term Slowdown Ahead#
Despite the upbeat FY26 forecast, the IMF cautioned that growth will moderate in the following two years. It projected that India’s economy will grow at 6.3% in calendar year 2026 and around 6.5% in 2027. The slowdown is expected as temporary and cyclical factors that supported rapid expansion ease.
The IMF also flagged risks to global growth, including U.S. tariffs and ongoing global uncertainty, though it predicted these factors would weigh less heavily on activity in 2026 and 2027.
Inflation Seen Near Target Levels#
The IMF said that India’s inflation is likely to settle back within the Reserve Bank of India’s 2–6% target range. This comes after a sharp decline in inflation last year, largely due to reduced food prices.
Other International Forecasts Align#
India’s robust growth outlook is not unique to the IMF. Last week, the World Bank also raised its forecast for India’s GDP to about 7.2% for FY26, citing strong domestic demand and structural reforms in tax and investment policy.
Economists such as Rumki Majumdar of Deloitte India told media that strong domestic demand, private consumption and ongoing reforms continue to support India’s growth prospects, even amid global headwinds.
Global Context: Mixed Signals#
The IMF projected global growth at around 3.3% in 2026, slightly above its 2025 estimate, though it warned that key sectors, especially technology may slow. Geopolitical tensions and trade frictions remain sources of uncertainty.
At the same time, global financial leaders at the World Economic Forum in Davos pointed to India’s potential to play an even larger role in the world economy. David Rubenstein, co-founder of the Carlyle Group, said India could become the world’s biggest economy within decades.
Where India’s Economy Stands#
India’s economy remains one of the fastest-growing among major nations. Its GDP size is now estimated at roughly $4.5 trillion (nominal), making it a key player in global growth dynamics. Domestic consumption, services and manufacturing have been primary growth drivers.
Clear Cut Research Desk
New Delhi, UPDATED: Dec 25, 2025 04:00 IST
Written By: Ayushman Meena
