IMF upgrades India’s FY27 GDP growth to 6.4% despite trade risks

DAVOS : The International Monetary Fund (IMF) on Monday revised India’s 2026–27 gross domestic product (GDP) growth forecast upwards by 20 basis points to 6.4 per cent from its October 2025 projection. This would be a decline from the 7.3 per cent growth projected for 2025–26 (FY26).

For FY26, the IMF, in its World Economic Outlook, revised its GDP growth forecast upwards by 0.7 percentage point to 7.3 per cent from its October 2025 estimate, citing a better-than-expected performance in the third quarter (October–December/Q3) and strong momentum in the fourth quarter (January–March/Q4).

“Growth is projected to moderate to 6.4 per cent in 2026 and 2027 as cyclical and temporary factors wane,” the IMF said in an update to its World Economic Outlook report.

India’s economy is estimated to grow 7.4 per cent in FY26, up from 6.5 per cent in 2024–25, according to the First Advance Estimates of GDP released by the National Statistics Office. 

Pierre-Olivier Gourinchas, IMF economic counsellor and director of research, said that while global growth has been resilient amid trade disruptions, the negative effects of such disruptions are likely to build up over time.

India is facing a 50 per cent tariff from the US, affecting labour-intensive sectors such as textile, footwear, and marine product. US President Donald Trump on January 13 announced that the country would impose a 25 per cent tariff on any nation doing business with Iran, “effective immediately”.

The IMF report said inflation in India is expected to return to near-target levels after a marked decline in 2025, driven by subdued food prices.

The growth outlook, according to the Advance Estimates, has been aided by a GDP deflator at a five-decade low of 0.5 per cent, with nominal GDP growth projected at 8 per cent in FY26 — the slowest since the pandemic-impacted 2020–21.

On artificial intelligence (AI), Gourinchas said in a blog post that AI-driven investment offers transformative potential but also introduces financial and structural risks that require vigilance.

While innovation drives growth, he said it also risks displacing jobs and depressing wages for certain segments of the workforce.