Indian economy to grow at 6.5% in FY26 and FY27: IMF

India’s growth declined to a seven quarter low of 5.4 percent in Q2FY25, as manufacturing and investment growth declined.

Indian economy is likely to grow at 6.5 percent over the next two fiscals, the International Monetary Fund said in its latest World Economic Outlook update released on January 17.

The multilateral institution kept the growth forecast unchanged from the October update. For 2024-25, the international organisation projects 6.5 percent growth, a tad higher than the 6.4 percent growth estimated by the government.

“In India, growth is projected to be solid at 6.5 percent in 2025 and 2026, as projected in
October and in line with potential,” IMF said.

Data released earlier this month showed that the Indian economy slowed to 6.4 percent compared with 8.2 percent in the previous fiscal on the back of a growth slump in the second quarter.

India’s growth declined to a seven quarter low of 5.4 percent in Q2FY25, as manufacturing and investment growth declined.

The IMF forecast follows from World Bank update, which projected the economy to grow 6.7 percent over the next two fiscal, as it noted that manufacturing activity is expected to strengthen.

India, despite slower growth than earlier anticipated, will also keep the mantle of fastest growing major economy in the world.

Steady global growth

Much like India, the global growth is also expected to stay stable over the next two years at 3.3 percent, rising slightly from 3.2 percent in 2024.

“Medium-term risks to the baseline are tilted to the downside, while the near-term outlook is characterised by divergent risks. Upside risks could lift already-robust growth in the United States in the short run, whereas risks in other countries are on the downside amid elevated policy uncertainty,” IMF noted.

The international institution further highlighted that growing protectionism could disrupt growth.

“An intensification of protectionist policies, for instance, in the form of a new wave of tariffs, could exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and again disrupt supply chains,” it noted.