IMF raises India’s FY26 growth outlook to 6.6% – News Air Insight

The International Monetary Fund (IMF) on Tuesday raised India’s economic growth forecast for FY26 to 6.6% from 6.4% estimated earlier, citing strong first quarter growth that more than offset the impact of higher US tariff on Indian goods.

IMF, in its latest World Economic Outlook (WEO), however, lowered India’s growth projection for FY27 to 6.2% from 6.4% estimated in July.

Even for FY26, India’s updated growth projection is 0.2 percentage points lower than IMF’s pre-tariff forecast in October 2024. The Washington-based global financial institution expects India to record the highest growth rate among advanced economies, emerging markets and developing countries over the current and next fiscal year.

India’s gross domestic product (GDP) grew 6.5% in FY25 and surged to a fivequarter high of 7.8% in the April-June period. Earlier this month, the World Bank raised India’s FY26 growth forecast to 6.5% from 6.3% in June, citing improved rural demand and gains from the reduction in the goods and services tax (GST). However, it lowered FY27 GDP growth estimate to 6.3%, attributing the change to the delayed impact of US tariffs on the country.

Private sector has shown agility

The US has imposed a 50% tariff on Indian goods, one of the highest globally. India’s goods exports to the US account for around 2% of the country’s GDP.

The Reserve Bank of India (RBI) had also raised its FY26 GDP growth projection for India to 6.8% from 6.5% earlier.

The IMF has projected global growth at 3.2% this calendar year and 3.1% next year, a cumulative downgrade of 0.2 percentage points compared to its forecast a year ago. IMF chief economist Pierre-Olivier Gourinchas noted in a blog post that the growth downgrade is at the modest end of the range, with the United States negotiating trade deals with various countries and providing multiple exemptions.

He noted that most countries refrained from retaliation, keeping instead the trading system largely open. The private sector also proved agile — front-loading imports and speedily re-routing supply chains. “As a result, the increase in tariffs and its effect has been smaller than expected so far,” Gourinchas said.

The report highlighted various downside risks to the global outlook, including trade policy uncertainty and protectionism, labour shortages, fiscal and financial vulnerabilities, and rising commodity prices from climate shocks and regional conflicts. On the upside, it noted progress in trade negotiations, faster domestic structural reforms, and productivity gains from the rapid adoption of artificial intelligence (AI).