IMF raises India’s 2026 growth forecast to 7%, up from 6.4%

Mangalore Today News Network

New Delhi, Oct 13, 2026: India’s economy is projected to grow 7% in the year 2026, up from the International Monetary Fund’s (IMF) earlier estimate of 6.4%, as resilient domestic demand and strong services activity continue to support growth despite elevated oil prices and geopolitical uncertainties.

In its October World Economic Outlook (WEO), the IMF also raised India’s growth forecast for 2027  to 7% from 6.7% projected earlier, signalling that the country’s economic momentum could remain strong over the next two financial years.

The upward revision follows stronger-than-expected economic performance in the first quarter of FY27, when India’s gross domestic product (GDP) grew 7.8% year-on-year. The Reserve Bank of India (RBI) has also raised its GDP growth forecast for FY27 to 7.1% from 6.7% earlier.

India continues to stand out among major economies at a time when the global growth outlook remains uneven, with rising energy costs, geopolitical tensions and trade-related uncertainties weighing on several countries.

Why IMF Has Raised India’s Growth Forecast

The IMF attributed the improved outlook to resilient domestic demand and robust services activity, which have helped India sustain economic expansion despite higher energy costs and disruptions in the global economy.

Favourable demographic trends, a large and expanding domestic market, and continued structural reforms are also expected to support India’s medium-term growth potential.

The latest revision reflects the stronger-than-anticipated performance of the Indian economy and follows upward adjustments to growth projections by other institutions.

According to the IMF’s projections, India’s economy expanded 7.8% in FY26. Growth is expected to moderate to 7% in FY27 before remaining at the same level in FY28.

However, higher crude oil prices remain a key risk for the economy, given India’s dependence on imported energy. A sustained increase in oil prices could push up domestic inflation, widen the current account deficit and increase pressure on the rupee.

IMF Global Growth Outlook: World Economy To Grow 3.1% In 2026

The IMF expects global economic growth to slow from 3.5% in 2025 to 3.1% in 2026, before improving to 3.4% in 2027.

IMF said, “The global economy remains resilient, but that resilience is becoming more fragile and more uneven. Growth is projected at 3.1% in 2026 and 3.4% in 2027, while inflation is expected to reach 4.7%, driven largely by higher energy and food prices."

The outlook highlights diverging growth trajectories across economies, depending on their exposure to higher energy prices and their ability to benefit from the global technology upturn.

China’s economic growth is projected to slow to 4.5% in 2026 from 5% in 2025, before easing further to 4% in 2027. Higher oil prices, weak domestic demand and persistent structural challenges are expected to weigh on the Chinese economy.

The relative resilience of India’s growth outlook is particularly notable as several emerging economies that depend heavily on energy imports face pressure from rising commodity prices.

The IMF has warned that further disruptions to oil supplies, renewed trade tensions and tighter financial conditions could pose risks to the global economic outlook.

Inflation To Rise To 5% In FY27: IMF

Despite the stronger growth outlook, the IMF expects inflationary pressures in India to increase during the current financial year.

India’s consumer price inflation is projected to average 5% in FY27, compared with 2% in FY26, before easing to 4.4% in FY28.

The IMF’s FY27 inflation forecast is slightly below the RBI’s estimate of 5.2%. Meanwhile, India’s retail inflation rose to 5.5% in September, its highest level under the new CPI series.

Higher energy and commodity prices could add to inflationary pressures, potentially complicating the RBI’s monetary policy decisions even as economic growth remains robust.

India’s Current Account Deficit May Widen

The IMF also expects India’s external balance to come under some pressure in 2026. India’s current account deficit is projected to widen to 1.5% of GDP in 2026 from 0.7% in 2025, before narrowing to 1.3% in 2027.

A higher import bill, particularly for crude oil, could contribute to the widening deficit if elevated energy prices persist. The impact on the external balance will also depend on export performance, services receipts and other foreign exchange inflows.

Overall, the IMF’s latest projections point to continued strength in India’s growth outlook, supported by domestic demand and services activity. However, rising inflation, higher oil prices and external vulnerabilities remain key factors to watch in the months ahead.