The International Monetary Fund (IMF) has projected India’s economy to grow at 6.6% in FY 2025-26, reaffirming its position as one of the fastest-growing emerging markets despite a subdued global outlook.

The latest World Economic Outlook (WEO) report attributes this upgrade to India’s resilient first-quarter performance, which managed to offset the impact of increased US tariffs on Indian exports.

According to the IMF, India’s robust GDP growth in the first quarter—measured at 7.8%—has created a strong carryover effect for the full fiscal year. The report predicts that India will surpass China, whose growth is expected to slow to 4.8%, consolidating India’s role as the primary engine of global emerging market expansion.

The upward revision marks a 0.1% rise from the April 2025 forecast, signalling confidence in India’s domestic demand fundamentals and fiscal management. For FY 2026-27, however, the IMF slightly reduced its projection to 6.2%, anticipating a moderation in the momentum generated earlier.

Globally, the IMF foresees slower growth amid a challenging trade environment and persistent geopolitical tensions. The world economy is projected to expand by 3.2% in 2025, before marginally easing to 3.1% in 2026. Advanced economies are expected to maintain slow growth at 1.6%, whereas emerging market and developing economies are estimated to grow at 4.2%, indicating a two-speed recovery.

Inflation levels are forecast to continue easing worldwide, though divergent trends persist among major economies. The report notes that while inflation in the United States may remain above target with upside risks, it will likely stay subdued in most other regions.

Among advanced economies, Spain is projected to lead growth with 2.9%, followed by the United States at 1.9%, down from 2.4% in 2024. Other major economies such as Canada (1.2%), Japan (1.1%), and Brazil (2.4%) are expected to exhibit modest progress. The ASEAN-5 region also continues to demonstrate steady expansion, supporting overall emerging market resilience.

Despite India’s impressive growth track, the IMF cautioned that the global economy faces significant risks. These include prolonged trade uncertainty, rising protectionism, and labour market disruptions. The Fund also warned that fiscal vulnerabilities and potential financial corrections could threaten macroeconomic stability.

To safeguard global recovery, the IMF urged nations to pursue credible and transparent fiscal policies, restore confidence, and reinforce institutional frameworks. It called for the rebuilding of fiscal buffers, preservation of central bank independence, and acceleration of structural reforms to sustain growth amid persistent external shocks.

India’s government has maintained its domestic GDP forecast between 6.3% and 6.8% for FY 2025-26, reflecting continued confidence in the economy’s internal strength and consumption-led growth. The IMF’s upward revision aligns with this assessment and underscores India’s growing resilience amid global trade disruptions and shifting policy landscapes.

Based On ANI Report