Context: The International Monetary Fund (IMF) has revised upwards its estimate of India’s Gross Domestic Product (GDP) growth in the current financial year 2025-26 to 7.3% from its earlier prediction of 6.6%.
- This upward revision, the IMF said in its January 2026 World Economic Outlook update released on Monday, was primarily a reflection of stronger-than-expected growth in the third quarter, and “strong momentum” in the fourth quarter of the financial year.
- “In India, growth is revised upward by 0.7 percentage point to 7.3% for 2025 [FY 2025-26], reflecting the better-than-expected outturn in the third quarter of the year and strong momentum in the fourth quarter,” the report said. “Growth is projected to moderate to 6.4% in 2026 and 2027 as cyclical and temporary factors wane,” it added.
Slower figure
- The IMF’s prediction of 7.3% growth for 2025-26 is just marginally slower than the 7.4% the Union government predicted for the same period.
- For the global economy, the report projects growth to remain “resilient” at 3.3% in calendar year 2026 and at 3.2% in 2027, largely the same as the 3.3% estimated for 2025.
- These forecasts entail a small upward revision for 2026 and no change for 2027 as compared with the predictions made in the October 2025 World Economic Outlook. “This steady performance on the surface results from the balancing of divergent forces,” the report said.
Turbulent times
- “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.”
- On the inflation front, the report predicted that inflation in India is expected to go back to near-target levels after a decline in 2025 driven by subdued food prices. The Reserve Bank of India’s target for inflation is 4%.