Growth is expected to remain steady at 6.5% in 2027-28, according to the IMF’s latest World Economic Outlook released on Tuesday. Based on these estimates, India is estimated to remain the fastest-growing economy in both years.
India is expected to have clocked a gross domestic product (GDP) growth of 7.6% in 2025-26, as per government projections.
Earlier this month, the World Bank raised India’s growth outlook for this fiscal to 6.6% from 6.3%, citing robust domestic demand and export performance. Similarly, the Asian Development Bank (ADB) revised its estimate to 6.9% from 6.5%, driven by increasing consumption, higher investment, supportive policies and recent trade agreements.
The Reserve Bank of India (RBI) has projected 6.9% growth for this fiscal.
The IMF’s projections assume the West Asia conflict will persist for a few more weeks, followed by a gradual recovery, with disruptions easing and production and exports from the region normalising by mid-2026.
Globally, growth is forecast at 3.1% in 2026 and 3.2% in 2027, slower than the 3.4% recorded in 2025. This moderation largely reflects disruptions from the West Asia conflict, partly offset by recent strong data and lower tariff rates, according to the IMF.Over the medium term, global growth is expected to stabilise at around this level, below the historical average of 3.7% between 2000 and 2019.
“Absent the war, global growth would have been revised upward,” the IMF noted, adding that preconflict assumptions would have slightly raised 2026 growth to 3.4%.
Under an adverse scenario with larger and more sustained energy price spikes, global growth could slow to 2.5% in 2026 and inflation would rise to 5.4%, as per the IMF. In a more severe case involving major damage to energy infrastructure, growth may drop to around 2%, with inflation exceeding 6% by 2027.
The IMF said risks remain tilted to the downside due to geopolitical tensions, trade conflicts, and financial pressures, though upside potential exists from Artificial Intelligence-led growth, reforms, and easing trade tensions.
Emerging market and developing economies are now projected to grow at 3.9% in 2026, lower than the 3.6% previously estimated.
China’s outlook has been marginally revised down to 4.4%, while the United States is expected to grow at 2.3%.
In India, inflation is projected to rise to 4.7% in this fiscal from 2.1% last year, before easing to 4% in 2027-28, according to the IMF.
“Inflation in India is expected to return to near target levels after subdued food prices drove a marked decline in 2025,” it said.
The RBI targets inflation to be maintained at 4% with a 2 percentage point tolerance band on both sides.
Global inflation, meanwhile, is expected to increase to 4.4% in 2026 before moderating to 3.7% in 2027.
India’s current account deficit is estimated at 2% of GDP in 2026-27 and 1.6% next fiscal, as per the IMF.
Policy outlook
The IMF emphasised that managing evolving current economic and geopolitical uncertainties will require a comprehensive policy approach. This includes maintaining price and financial stability, ensuring fiscal sustainability and implementing structural reforms without further delay.
It also highlighted the importance of addressing domestic imbalances, especially where such measures can help reduce excessive external imbalances.
“Countries should cooperate and take coordinated actions to restore stability in international economic relations. They should seek opportunities to enhance trade integration, supported by predictable, transparent, and well-communicated trade policy frameworks,” the IMF said.