January 19, 2026 : The International Monetary Fund has raised India’s economic growth forecast for 2025 by a sharp 0.7 percentage point to 7.3%, pointing to stronger-than-expected performance in the second half of the year.
In its latest World Economic Outlook Update, the IMF said the revision reflects a better-than-expected outturn in the third quarter and solid momentum carrying into the fourth quarter. The assessment reinforces India’s standing as one of the fastest-growing major economies.
Looking ahead, the Fund expects growth to moderate to 6.4% in both 2026 and 2027 as cyclical and temporary tailwinds ease. Even so, India is projected to remain a key driver of expansion among emerging market and developing economies, which are forecast to grow at just over 4% in 2026 and 2027.
The IMF noted that emerging and developing Asia continues to benefit from technology-led investment and trade, despite uneven global momentum. Globally, growth is projected to hold steady at 3.3% in 2026, supported by easing trade tensions, accommodative financial conditions, and a surge in technology-driven investment, particularly in artificial intelligence.
Inflation prospects for India were described as favourable. The IMF expects inflation to return close to target levels after a marked decline in 2025, largely due to subdued food prices, which could bolster domestic demand.
At the same time, the Fund warned that global risks remain tilted to the downside. A reassessment of expectations around AI-driven productivity gains could curb investment and tighten financial conditions, with spillover effects on emerging economies. On the upside, faster and broader adoption of artificial intelligence could lift global growth if productivity gains materialise without creating financial stress. – INAS
