India’s Growth Outlook Stays Resilient as IMF Flags Fragile Global Recovery

India’s growth prospects remain a bright spot in an otherwise subdued global landscape, with the International Monetary Fund lifting its 2025-26 GDP forecast to 6.6%, up 20 basis points from July’s 6.4%. The revision reflects a strong first-quarter performance that has offset the impact of higher US tariffs on Indian goods. However, growth is expected to moderate to 6.2% in FY27, suggesting that the post-pandemic rebound is normalising.

According to the IMF’s latest World Economic Outlook , India’s economic momentum is being powered by a robust services sector and resilient domestic demand, even as external headwinds persist. The IMF’s forecast now slightly exceeds the World Bank and ADB’s 6.5% estimate, but lower than RBI’s estimate of 6.8%.

The IMF highlighted that India’s upward revision is largely a function of strong early-year carryover rather than fresh cyclical impetus, implying a gradual easing in growth as fiscal consolidation and trade headwinds take effect. Yet, among large economies, India remains the fastest-growing, underscoring its expanding domestic market and relatively contained inflation trajectory.

The IMF urged India and other emerging economies to rebuild fiscal buffers, maintain monetary independence, and advance structural reforms to sustain medium-term growth. Durable multilateral trade agreements could help lower uncertainty and add as much as 0.4% to global output, it said.

Fragile Global Growth
While India’s performance stands out, the IMF’s tone on the global economy is cautious. The IMF expects world GDP growth to slow from 3.3% in 2024 to 3.2% in 2025. While the 2026 outlook remains unchanged from July, at 3.1%. It warned that despite easing trade tensions, global growth remains “fragile and uneven,” with risks tilted to the downside.

IMF Chief Economist Pierre-Olivier Gourinchas noted that the economic impact of the tariff surge has been “smaller than feared” so far, but warned against premature optimism. The United States’ effective tariff rate remains elevated, and renewed trade frictions could lower global output by 0.3% next year. “Other economic forces, including tighter immigration policies and supply shocks, are simultaneously at play,” he said.

The IMF projects advanced economies to grow 1.6% in 2025 and 2026, while emerging markets and developing economies are seen expanding by 4.2% and 4%, respectively. The US economy is forecast to grow 1.9% in 2025 and 2% in 2026, up 10 bps both years, supported by strong investment in artificial intelligence and loose financial conditions. However, tighter immigration rules could shave 0.3–0.7% off annual US GDP, the IMF warned.

For China, growth is projected at 4.8% in 2025 and 4.2% in 2026, unchanged from July. The IMF cited weaker domestic demand and property sector stress, though offset by a softer yuan and fiscal support.

Risks, Policy Priorities
The IMF cautioned that global growth faces a mix of structural and cyclical headwinds--ranging from trade fragmentation and fiscal vulnerabilities to potential financial market corrections linked to the AI investment boom. A sharp reversal in tech valuations, it said, could mirror the dot-com crash of 2000–01, eroding household wealth and slowing consumption.

On the policy front, the Fund reiterated that governments must balance short-term stabilization with long-term productivity enhancement. “A pragmatic and adaptive multilateral system that fosters cooperation can help us meet these challenges,” Gourinchas said.

Despite its measured tone, the report suggests that India’s resilience offers a rare point of stability in an uncertain global cycle--highlighting both its progress in structural reform and the critical need for continued fiscal prudence and policy adaptability.