IMF raises India FY27 GDP growth projection to 6.5%

Global growth projected to slow to 3.1% this year

New Delhi: The International Monetary Fund (IMF) on Tuesday upgraded India’s GDP growth forecast for the current financial year to 6.5%, which is 10 basis points higher than its earlier projection announced in January.

In its latest World Economic Outlook, the IMF noted that the reduction in additional US tariffs on Indian goods from 50% to 10% following the US Supreme Court’s order would outweigh the adverse impact of the ongoing West Asia conflict.

“For 2026, growth is revised upward moderately by 0.3 percentage point (0.1 percentage point relative to January) to 6.5%, led by positive contributions from the carryover of the strong 2025 outturn and the decline in additional US tariffs on Indian goods from 50 to 10%, which outweigh the adverse impact of the Middle East conflict. Growth is projected to stay at 6.5% in 2027,” IMF noted.

However, the projected growth for the current fiscal is substantially lower than the previous year’s estimate of 7.6%.

Despite the upgrade, the IMF’s India growth projection for the current financial year is lower than the Reserve Bank of India’s estimate of 6.9% and the World Bank’s 6.6%.

At the global level, the IMF warns that the West Asia conflict would pull down growth and lead to inflationary pressure.

“Assuming that the conflict remains limited in duration and scope, global growth is projected to slow to 3.1% in 2026 and 3.2% in 2027,” the IMF said.

Global headline inflation is projected to rise modestly in 2026 before resuming its decline in 2027. Slowdown in growth and increase in inflation are expected to be particularly pronounced in emerging markets and developing economies, it added.

DK Srivastava, Chief Policy Advisor, EY India, said the IMF report makes reference to three scenarios for global growth.

In its baseline scenario, it assumes a short-lived West Asia conflict in which the projected global growth for 2026 is 3.1%. In contrast, in the adverse scenario, global growth falls to 2.5% and in its severely adverse scenario, global growth may fall to 2%. Correspondingly, global inflation has been projected at 4.4%, 5.4% and 6.0% respectively.

For India, the IMF with respect to the baseline scenario projects a growth of 6.5% for 2026-27 and CPI inflation of 4.7%. In a scenario where the West Asian crisis may last well beyond the expectation of a short-lived conflict, India’s growth may be around 6.5% and inflation somewhat higher.

If the price of Indian crude basket averages around $120 per barrel during the year, in the context of a relatively longer conflict, our estimates indicate that India’s GDP growth may reach a level of 6.1% to 6.2%. Even so, it will be more than double that of global growth under the adverse scenario, Srivastava said.

“The IMF suggests careful calibration of policy responses since much room for fiscal manoeuvrers or monetary policy do not exist. Any fiscal responses may need to be well targeted so that any deviation from the medium-term fiscal consolidation path is minimal,” Srivastava noted.