IMF raises India’s FY26 growth forecast to 6.4%, citing improved global outlook

India's economy to grow faster in Fy26

The International Monetary Fund (IMF) has revised India’s economic growth forecast for FY26 upward to 6.4 percent, up from 6.2 percent projected in April, citing a more favourable external environment. The updated figures were released in the IMF’s World Economic Outlook on July 29.

The multilateral institution also raised India’s FY27 growth forecast to 6.4 percent, up from 6.3 percent previously. “In India, growth is projected to be 6.4 percent in 2025 and 2026, with both numbers revised slightly upward, reflecting a more benign external environment than assumed in the April reference forecast,” the Washington-based lender noted.

The upward revision brings the IMF forecast in closer alignment with the Reserve Bank of India’s projection of 6.5 percent growth for the upcoming fiscal, and comes just days after the Asian Development Bank (ADB) lowered its forecast to 6.5 percent from 6.7 percent in its latest outlook.

"The Indian economy is projected to grow 6.5% in FY2025, lower than the 6.7% forecast in the April 2025 ADO but still one of the fastest growing major economies in the world," ADB stated in its July release.

Globally, the IMF revised its 2025 growth forecast to 3.0 percent, up from 2.8 percent estimated earlier. The institution attributed the improved outlook to several factors, including stronger front-loading of trade ahead of tariff hikes, lower-than-expected average US tariff rates, weaker dollar conditions, and fiscal expansions in major economies.

“This reflects stronger-than-expected front-loading in anticipation of higher tariffs; lower average effective US tariff rates than announced in April; an improvement in financial conditions, including due to a weaker US dollar; and fiscal expansion in some major jurisdictions,” the IMF said.

Risks remain on the horizon

Despite the upward revisions, the IMF flagged downside risks to growth.

“A rebound in effective tariff rates could lead to weaker growth. Elevated uncertainty could start weighing more heavily on activity, also as deadlines for additional tariffs expire without progress on substantial, permanent agreements,” the report warned.

The US is in the process of negotiating trade deals with countries before the August 1 deadline.