In light of a more favorable external environment and decreased inflation, the International Monetary Fund (IMF) increased its growth forecast for India for the fiscal year 2025–2026 (FY26) on Tuesday from 6.2% to 6.4% in April.
In addition to scaling up India's GDP prediction for FY27 by 10 basis points (bps) to 6.4%, the multilateral lender also updated its World Economic Outlook (WEO) report, which included the 20 basis point (bps) increase.
According to the April reference prediction, growth in India is expected to be 6.4 percent in [FY 2026 and FY 2027], with both figures revised slightly upward to reflect a more benign external environment. This comparatively steady growth has been fueled by a push for public investment and a reform momentum that supports strong consumption growth. In the short run, India must increase its investment in education, move closer to land reform, broaden its social safety net, and cut back on red tape so that businesses can operate more efficiently.
The IMF increased its prediction for global growth by 10 basis points to 3.1% for 2026, 20 basis points higher than its April estimate of 3% for 2025. “This reflects lower average effective US tariff rates than announced in April, stronger-than-expected front-loading in anticipation of higher tariffs, and an improvement in financial conditions, including as a result of fiscal expansion in some major jurisdictions and a weaker US dollar.”
Along with a few other changes, the IMF claims that the global economy has so far been resilient due to the slight, if small, decrease in trade hostilities.
First, exports to the US saw a sharp increase in the first quarter of this year due to worries about potential tariffs. Activity in Europe and Asia was supported by this front-loading. Second, as global inflation continues to decline, monetary conditions loosened and financial circumstances improved. Third, since January, the dollar has lost almost 8% of its value.
The IMF predicted that growth in emerging markets and developing economies will be 4.1% in 2025 and 4% in 2026. China’s growth in 2025 is revised upward by 80 basis points to 4.8% from the April prediction.
Risks to the outlook include geopolitical tensions that could upset global supply chains and raise commodity prices, as well as a recovery in effective tariff rates that could result in slower growth. According to the WEO update, global headline inflation is predicted to follow the same trajectory as that predicted in April, declining to 4.2% in 2025 and 3.6% in 2026.