Global agencies cut GDP forecast to 6.2-6.7% in FY26; India to remain fastest growing economy

The International Monetary Fund (IMF) and the World Bank have slashed India's growth projections for 2025-26 to 6.2 and 6.3%, respectively, citing uncertain global environment and high trade tensions.

New Delhi: Amid the ongoing tariff war and uncertainty over the US trade policy, international agencies have cut India's growth projections by up to 0.5 per cent for the current fiscal, though the country will continue to be the fastest growing major economy.

India is expected to grow in the range of 6.2-6.7 per cent in the current fiscal, despite the possibility of the US economy slipping into recession, China's growth taking a heavy beating and globally, countries seeing slowing economic activity.

The International Monetary Fund (IMF) and the World Bank have slashed India's growth projections for 2025-26 to 6.2 per cent and 6.3 per cent, respectively, citing uncertain global environment and high trade tensions.

In January, the IMF and the World Bank had projected India to grow at 6.5 per cent and 6.7, respectively, in the current fiscal.

The Indian economy is estimated to have grown 6.5 per cent in the last fiscal.

As per the projections by the Reserve Bank of India, the country's economy will expand at the same rate in the current fiscal as well.

The Organisation for Economic Co-operation and Development (OECD) in March projected India's growth to slow down to 6.4 per cent, from 6.9 per cent estimated earlier.

Similarly, Fitch Ratings projected growth to be 6.4 per cent, while S&P estimated the same at 6.5 per cent. Moody's Analytics estimated growth to be 6.1 per cent for calendar year 2025.

On April 2, US President Donald Trump had announced reciprocal tariffs or taxes on imports from other countries to match the duties levied by those countries on imports from the US.

On April 9, the US administration authorised a 90-day pause on the implementation of most reciprocal tariffs, reverting to a universal rate of 10 per cent on almost all targeted countries, while raising tariffs on most goods from China to 145 per cent. On April 16, the US further hiked tariffs on exports from China to 245 per cent.

For China, the IMF lowered 2025 GDP growth estimates to 4 per cent from 4.6 per cent projected in January 2025.

Another global rating agency, Moody's Ratings, had last week said that the "tariffs have shocked financial markets and are raising the risk of a global economic recession. Continued uncertainty will impede business planning, stall investment and hit consumer confidence".

With regard to tariff impact on the US economy, Moody's said tariffs will shave at least one percentage point from US growth and significantly raise prices on US consumers and businesses.

Domestic constraints, particularly arising from already weak consumer sentiment, indicate that the government may not be able to muster enough support to offset the impact of tariffs, without which the country's growth could slip to 4 per cent or less this year, it said.

Asia Development Bank, in its update in April, however, projected India's growth to be 6.7 per cent in the current fiscal, lower than the 7 per cent projected earlier.

India's Economic Survey had in January projected the country's economic growth to be 6.3-6.8 per cent in the 2025-26 fiscal.