Source The Hindu
NEW DELHI – The International Monetary Fund (IMF) has significantly upgraded its economic growth forecast for India for the 2025-26 financial year, raising it to 7.3% from a previous estimate of 6.6%. The revision, detailed in the January 2026 World Economic Outlook (WEO) update, cements India’s position as the fastest-growing major economy globally.
The 70-basis-point jump reflects an economy that has consistently outperformed expectations. According to the IMF, the upgrade is primarily driven by a “better-than-expected outturn” in the third quarter and “strong momentum” carrying into the final months of the fiscal year.
Key Drivers of the Upgrade
The IMF’s revised outlook aligns with recent domestic data showing a robust recovery in several sectors. Several factors have contributed to this “Goldilocks” moment of high growth and cooling inflation:
Resilient Domestic Demand: Robust private consumption remains the primary engine of growth, defying global trends of slowing consumer spend.
Corporate Earnings & Investment: A surge in corporate profitability during the third quarter has revitalized investor confidence and spurred fresh capital inflows.
Technological Tailwinds: Global investments in Artificial Intelligence (AI) and technology have provided a significant boost to India’s services sector, offsetting headwinds from shifting international trade policies.
Policy Support: Rationalization of the Goods and Services Tax (GST) and targeted fiscal interventions have cushioned the impact of external shocks, such as US trade tariffs.
Comparative Growth Projections
The IMF’s new projection brings it closer to the Indian government’s own optimistic estimates and places it slightly ahead of other multilateral agencies.
Agency FY26 Growth Forecast (%)
IMF (New) 7.3%
Govt of India (NSO) 7.4%
World Bank 7.2%
IMF (Previous) 6.6%
A Look Ahead: 2026 and Beyond
While the immediate outlook is bullish, the IMF cautioned that growth might moderate to 6.4% in the 2026-27 period as “cyclical and temporary factors” begin to wane.
On the inflation front, the report offered a positive note, predicting that price pressures would continue to ease toward the Reserve Bank of India’s (RBI) 4% target, largely due to stabilizing food prices and effective monetary policy.
“India has emerged as a major growth engine for the world economy,” stated IMF spokesperson Julie Kozack. “The bottom line is that growth has been quite robust and continues to stand out among major economies.”
Despite the optimistic forecast, the IMF warned of potential risks, including global trade fragmentation and the need for continued structural reforms to sustain this pace of expansion in the long term.
