In its latest World Economic Outlook/Global Financial Stability Report update titled Global Financial Markets Confront the War in the Middle East and Amplification Risks, the IMF said growth is expected to remain steady at 6.5% in FY28.
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The fund attributes India’s resilience to strong carryover momentum from 2025, easing external tariff pressures, and domestic demand strength, even as global spillovers from the conflict weigh on emerging markets.
As the IMF notes, “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.”
For India, IMF data and forecasts are presented on a fiscal year basis.
“In India, growth for 2025 is revised upward by 1.0 percentage point relative to October, to 7.6%, reflecting the better-than-expected outturn in the second and third quarters of the fiscal year and sustained strong momentum in the fourth quarter,” it added.
Global growth hit by geopolitical shock
At the broader level, the IMF warns that the conflict in the Middle East is disrupting trade, energy flows, and financial conditions, pulling down growth across emerging markets and raising inflation risks.
Emerging and developing economies are expected to slow to 3.9% in 2026 before recovering to 4.2% in 2027. Asia in particular sees a moderation in momentum, even as China receives a modest upgrade for 2026.
The report highlights uneven impacts across regions, with commodity importers facing higher inflation pressures and tourism-dependent economies seeing demand softness.
Inflation seen rising before easing
Global inflation, which had been on a declining path, is now expected to temporarily rise again before easing later in the decade.
The IMF states, “global inflation is projected to pause its decline, with headline inflation increasing from 4.1% in 2025 to 4.4% in 2026 before falling back to 3.7% in 2027. This is a 0.7 percentage point upward revision in 2026 from the figure in the October 2025 WEO, reflecting higher energy and food prices.”
It adds that inflation dynamics will vary widely across economies, with services inflation proving sticky in several advanced economies, while supply shocks and energy costs drive near-term pressures elsewhere.
For India specifically, inflation is expected to normalise after food-driven softness in 2025, returning closer to target levels over the forecast horizon.
War reshapes global outlook
The IMF cautions that the global outlook is now being shaped less by steady post-pandemic normalisation and more by overlapping shocks — from geopolitical conflict to trade fragmentation and financial market volatility.
It also warns that risks remain skewed to the downside, with scenarios of prolonged conflict or deeper energy disruptions potentially dragging global growth much lower than the current baseline.
Even so, the fund notes that resilience in large emerging markets like India is helping prevent a sharper global slowdown, though not enough to fully offset the drag from geopolitical stress.