The International Monetary Fund delivered sobering news about India's economic prospects on Monday. The global financial institution predicts a significant slowdown in India's GDP growth for the coming fiscal year.
Sharp Decline in Growth Projection
According to the IMF's latest World Economic Outlook update, India's economic expansion will moderate to 6.4% in 2026-27. This represents a substantial drop from the 7.3% growth forecast for the current fiscal year 2025-26. The multilateral agency made this announcement just days after the World Bank maintained its own projection of 6.5% growth for India.
The IMF explained this anticipated slowdown by noting that "growth is projected to moderate to 6.4% in 2026 and 2027 as cyclical and temporary factors wane." Despite this downward revision for next year, the current forecast actually represents an improvement over previous estimates.
Upward Revisions from Previous Estimates
Interestingly, the IMF's 6.4% projection for 2026-27 is 20 basis points higher than its October forecast of 6.2%. Similarly, the 7.3% growth estimate for 2025-26 marks a 70 basis point increase from the 6.6% forecast made toward the end of the previous calendar year.
The IMF attributed these upward revisions to "better-than-expected outturn in the third quarter of the year and strong momentum in the fourth quarter." This assessment aligns with recent economic data showing surprising strength in the Indian economy.
Recent Economic Performance and Projections
Data released in November 2025 revealed that India's GDP growth unexpectedly surged to 8.2% during the July-September quarter. This performance comfortably exceeded all analyst forecasts. Following this strong showing, the Reserve Bank of India upgraded its growth forecast for the current fiscal year to 7.3% in December.
Earlier this month, the Ministry of Statistics and Programme Implementation provided its first advance estimate for 2025-26 GDP growth at 7.4%. This projection implies that growth will slow to 6.9% in the second half of the fiscal year from 8% in the first half.
For the fiscal year 2027-28, the IMF maintained its October 2025 forecast of 6.4% growth without any changes.
Important Data Revisions Ahead
All current projections, including MoSPI's advance estimate, face potential revision due to significant methodological changes underway. India is updating its GDP data calculation framework, receiving a C grade from the IMF in December for its statistical practices.
The new series will shift the base year to 2022-23 from 2011-12 and incorporate several methodological improvements along with new data sources. MoSPI will release the first growth figures under this revised framework on February 27, 2026. At that time, the agency will announce GDP estimates for October-December 2025 and provide the second advance estimate for 2025-26.
These updates to the base year and improvements in data coverage and methodologies are crucial for accurately representing an economy that has transformed significantly over the years. Once the new series becomes available, forecasts from various agencies will likely require substantial adjustments.
Inflation Outlook and Global Context
Beyond growth projections, the IMF offered additional commentary on the Indian economy. The institution stated that inflation is expected to return to "near target levels" in the coming period.
Globally, the IMF raised its 2026 growth forecast by 20 basis points to 3.3% while maintaining its 2027 projection at 3.2%. The report noted that "steady performance on the surface" results from divergent forces balancing each other out.
The IMF explained that "headwinds from shifting trade policies are offset by tailwinds from surging investment related to technology, including artificial intelligence (AI), more so in North America and Asia than in other regions, as well as fiscal and monetary support, broadly accommodative financial conditions, and adaptability of the private sector."
Major Economies Receive Upgrades
Among advanced economies, the United States led the way with growth upgrades. The IMF now projects the US economy to expand by 2.4% in 2026, representing a 30 basis point improvement over October's forecast. However, growth is expected to slow slightly to 2% in 2027, down 10 basis points from previous estimates.
China, the world's second-largest economy, also received a 30 basis point upgrade for 2026, bringing its growth projection to 4.5%. The forecast for 2027 stands at 4%, representing a 20 basis point reduction from earlier projections.
The IMF's forecasts assume an effective tariff rate of 18.5% for the United States, slightly lower than the 18.7% rate projected in October. The institution added that "economic policy uncertainty is assumed to remain elevated through 2026."
