The International Monetary Fund (IMF) on Tuesday, April 14, revised and upgraded India’s growth projection to 6.5% for the financial year 2026-27, which means an additional 0.1 percentage point hike in the gross domestic product (GDP) from the previous projection, made in January.
The apparent reason is the decline in US tariffs on Indian goods from 50% to 10%, which would net-net offset the adverse impact of the ongoing West Asia conflict triggered by US-Israeli strikes in Iran in February.
However, the IMF downgraded its forecast for global growth from the earlier 3.3% it had forecast back in January to 3.1% in 2026. It warned that the Iran war has stalled the world’s economic momentum this year, and highlighted the implication that the growth could be lower this year compared to 2025. This expected growth figure would also mark a deceleration from a 3.4% expansion in 2025.
IMF marks up global inflation amid West Asia conflict
The IMF also marked up its expectation for global inflation this year to 4.4% from 4.1% in 2025. It had forecast 3.8% global inflation in January this year.
However, the US-Israeli strikes on Iran and the situation in West Asia deteriorating after February 28, including the closure of Strait of Hormuz, led to oil and gas prices climbing higher across the world. This was also worsened by Iran’s retaliatory strikes on energy facilities in the Gulf countries.
The global economy had, until the conflict, shown surprising resilience in the face of President Donald Trump’s protectionist policies, the Associated Press reported. The US, world’s biggest economy and once a market open to imports, had built a wall of import taxes.
‘War in Middle East halted momentum’
A tech boom, including massive investment in data centers and artificial intelligence, was predicted to strengthen the world economy.
“War in the Middle East has halted this momentum,” IMF chief economist Pierre-Olivier Gourinchas wrote in a blog post accompanying the latest World Economic Outlook.
However the IMF forecast assumes that the West Asia conflict is a short-term occurrence, and that the energy prices rise “moderate 19%” this year. The IMF also highlighted a “severe scenario” if the war drags out, saying if the energy shocks spill into next year, global growth could drop to 2% in 2026 and 2027. “Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated,” Gourinchas stated.