IMF raises India’s economic growth forecast to 7% in current financial year

Washington: The International Monetary Fund (IMF) has raised India’s growth forecast to 7 per cent in 2026-27, higher than the 6.4 per cent in July, on the back of resilient domestic demand and robust services activity, placing the country among the fastest-growing major economies.

“India remains among the fastest-growing major economies, with growth in 2026 projected at 7.0 per cent,” the IMF said in the World Economic Outlook (WEO) report released at its annual meeting in Bangkok.

“This reflects stronger-than-expected momentum, supported by resilient domestic demand and robust services activity,” the report said.

It said India is projected to grow at 7 per cent in 2027-28, up from the July estimate of 6.7 per cent.

It said India’s growth remained robust, underpinned by domestic demand and services, despite higher oil prices.

On the medium-term outlook, the IMF said India stands out with upward revisions, reflecting sustained momentum and growing evidence of stronger growth potential supported by favourable demographic dynamics, a large and expanding domestic market, and continued structural reforms.

According to the IMF, global output is projected to expand at an average annual pace of 3.2 per cent in 2028–31, a persistently lacklustre performance compared with the pre-pandemic (2000–19) historical average of 3.7 per cent.

Relative to that, in January 2026, the medium-term outlook has become increasingly uneven, with downgrades concentrated among economies directly affected by the conflict in the Middle East and energy-importing emerging market and developing economies elsewhere, excluding India.

On trade, the WEO said new agreements “such as the EU’s recent trade agreements with India and MERCOSUR (South American regional economic and political integration bloc)… or the United Kingdom’s agreement with India” could lower tariff and non-tariff barriers, help economies adjust to recent trade policy changes and strengthen supply-chain resilience.

Meanwhile, the IMF has slightly upgraded its outlook for the world economy for this year, but it’s still forecasting growth at a sluggish 3.1%.

The IMF had forecast global growth at 3.0% in July. The world economy expanded at a 3.5% annual pace in 2025.

The IMF Economic Outlook predicts that growth in the United States will remain steady at 2.3% in 2026 and 2027.

Countries that are somewhat insulated from the energy shocks of the Iran war and that are benefiting from rapid adoption of AI are managing to keep growth on track. But developing economies and emerging markets more vulnerable to higher costs for oil and gas will see growth slow to 3.7% this year from 4.5% in 2025, the report says. It forecasts they will regain momentum next year, expanding at a 4.4% annual pace.

The situation is much worse in the Middle East and Central Asia, where those regions’ economies are expected to contract this year before recovering to a 6.3% rate of growth in 2027.

The 21 European countries that share the euro currency are expected to grow by 1.1% this year and 1.2% in 2027.

China, the world’s No. 2 economy, is expected to expand 4.5% this year, down from 5% in 2025, in line with the government’s official target.

The IMF is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty.

At the meetings in Bangkok, finance ministers and central bank governors will assess the state of the world economy and discuss strategies to support financial stability and sustained growth.