India’s economy continues to demonstrate resilience at a time when global growth remains uneven. Reflecting this strength, the International Monetary Fund (IMF) has raised its forecast for India’s economic expansion in FY26 to 7.3 per cent, reinforcing the country’s status as one of the fastest-growing major economies in the world.
The revised outlook, published in the IMF’s latest World Economic Outlook, points to stronger-than-anticipated corporate performance and sustained domestic momentum. At the same time, the global lender has flagged a gradual cooling of growth beyond FY26 as short-term tailwinds begin to ease.
Why the IMF Turned More Optimistic
The IMF upgraded India’s growth projection by 0.7 percentage points, citing improved economic traction in the second half of the fiscal year. Corporate earnings surprised on the upside in the third quarter, while momentum carried into the fourth quarter, helping restore confidence after a period of market volatility.
Domestic demand has remained a key pillar of growth. Consumption has held up well, supported by steady urban spending and a gradual improvement in rural demand. Public investment, particularly in infrastructure, continues to play a stabilising role, cushioning the economy against external shocks.
Encouragingly, the IMF also noted that the global economy has largely absorbed the immediate impact of recent tariff-related disruptions, easing fears of a sharp global slowdown.
Growth to Moderate After FY26
Despite the upbeat near-term outlook, the IMF expects India’s growth to moderate to around 6.4 per cent in FY27 and FY28. This slowdown reflects the fading of cyclical and temporary factors that have supported recent expansion.
As post-pandemic recovery effects diminish, the report suggests that sustaining high growth rates will increasingly depend on deeper structural reforms, productivity improvements, and stronger private-sector investment rather than short-term momentum alone.
Context: A Recovery After a Challenging Phase
The upgraded forecast follows a period of heightened uncertainty last year, when a slowdown in corporate earnings growth weighed on economic sentiment and equity markets. Elevated valuations, persistent global trade tensions, and concerns over export performance—particularly in the wake of US tariff actions—led to foreign fund outflows and cautious investor behaviour.
While these pressures have eased, they underscored India’s exposure to global developments, even as domestic fundamentals remained relatively strong.
What It Means for the Economy
The IMF’s revised outlook is likely to strengthen confidence among investors, businesses, and policymakers. A higher growth trajectory supports:
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Improved corporate profitability
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Greater investment activity
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Stable capital flows
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Continued emphasis on infrastructure-led growth
However, the projected moderation beyond FY26 also serves as a reminder that long-term economic strength will depend on expanding manufacturing capacity, boosting exports, and improving ease of doing business.
India in the Global Growth Landscape
At a time when many economies are grappling with slowing growth, India continues to stand out for its scale, demographic advantage, and domestic demand-driven model. The IMF’s assessment reinforces India’s role as a key contributor to global economic expansion.
Still, navigating the next phase will require balancing growth ambitions with fiscal discipline, managing inflationary risks, and responding effectively to shifts in global trade dynamics.
Looking Ahead
The IMF’s upgraded forecast sends a clear message: India’s near-term growth prospects remain strong, even amid global uncertainty. Yet, the expected moderation in subsequent years highlights the importance of converting cyclical strength into sustainable, long-term growth.
For policymakers and investors alike, the challenge now is to ensure that momentum today lays the foundation for stability and resilience tomorrow.